Buy the Dip in Amazon Stock After Mixed Q4 Results & CapEx Concerns?

Core Insights - Amazon reported exceptionally strong Q4 results with quarterly revenue reaching $213.38 billion, a nearly 14% year-over-year increase from $187.79 billion, surpassing estimates of $211.45 billion [3] - The company experienced robust growth across all major business segments, including a 20% increase in advertising revenue to $21.32 billion and a 20% rise in AWS revenue to $35.6 billion [3] - Despite strong revenue growth, Amazon slightly missed earnings expectations with a net income of $21.2 billion, up 6% year-over-year, and adjusted earnings per share (EPS) of $1.95, which fell short of the expected $1.98 [4][16] Revenue and Earnings Performance - Amazon's annual sales for fiscal 2025 surpassed $700 billion for the first time, reaching $716.92 billion, a 12% increase from the previous year [9] - The company provided Q1 revenue guidance of $173.5-$178.5 billion, indicating an expected growth of 11-15%, with the upper end exceeding consensus expectations of $175.48 billion [9][10] - Amazon has surpassed top line expectations for six consecutive quarters, with an average sales surprise of 1.55% in its last four quarterly reports [5] Capital Expenditure and Valuation - Amazon announced a significant increase in capital expenditures, planning to spend $200 billion in 2026, a 53% increase from the $131 billion spent in the previous year, which led to a 10% drop in stock price [2][16] - The stock is currently trading at a forward P/E valuation of 28X, the lowest in the last decade, presenting a potential buying opportunity for long-term investors [2][17] Return on Invested Capital (ROIC) - Amazon's ROIC stands at 16%, which is below the desired level of 20% and the lowest among its peers in the Mag 7 hyperscalers, but it is still higher than the Zacks E-Commerce Market average of 15% [13] - The company is focusing on building infrastructure and AI capabilities, which is expected to enhance its ROIC in the long term [12][11] Conclusion - Despite a slight EPS miss and a substantial capital expenditure plan, Amazon's Q4 results indicate a strong acceleration in its core business segments, which could present an attractive opportunity for long-term investors [16]