Jefferies analysts Brian Pitz and Brian Fitzgerald rate Amazon.com, Inc. (NASDAQ:AMZN) as a Buy as they provide an outlook on the company’s 4Q13 results.

Amazon

Worldwide unit growth was +25% Y/Y (down from +29% in 3Q13) and 3P accounted for 39% of total paid units. Revenue came in below our and Street expectations but margins were better than expected. EPS also came in below Street expectations. Amazon.com, Inc. (NASDAQ:AMZN) guided largely below Street for 1Q14. Seeing strong demand for Amazon Prime in Q4, management announced they are considering a price increase of $20-40 in the US.

Amazon’s 4Q13 results

Revenue increased +20% Y/Y (+22% ex-FX) to $25.59B, below our $26.23B and Street’s $26.05B, with some of the headwind coming from a negative FX impact of $258MM. GAAP EPS of $0.51 were below Street’s estimate of $0.74. GAAP Operating Income of $510MM (+2.0% margin) was ahead of Street’s $468MM (+1.8% margin). Gross margin of 26.5% came in higher than Street’s 25.7%. GAAP Operating Income margin of +2.0% was better than Street’s +1.8%. Non-GAAP Operating Income margin of +3.4% was above Street’s +3.0%.

Amazon’s 1Q14 guidance

Amazon.com, Inc. (NASDAQ:AMZN) expects net sales between $18.2B and $19.9B (midpoint $19.1B), below Street at $19.67B. This implies top-line growth between 13% and 24% Y/Y. GAAP Operating Income is expected to be between -$200MM and $200MM (midpoint $0MM) vs. Street’s $379MM. For non-GAAP Op Income, AMZN expects between $150MM and $550MM, with midpoint of $350MM, below Street’s $656MM. We’d like to point out here that AMZN usually guides fairly conservatively and have consistently been able to beat Operating Income guidance over the past 8 quarters.

Amazon’s geographic results

Amazon.com, Inc. (NASDAQ:AMZN)’s North America revenue increased +26% Y/Y to $15.33B, below our $15.44B and consensus at $15.57B. International revenue increased +13% Y/Y to $10.26B, below our $10.79B and consensus at $10.54B.

Business segment results

Amazon.com, Inc. (NASDAQ:AMZN)’s media revenue increased +11% Y/Y to $7.23B, above our $7.19B and consensus at $7.13B. Electronics and other general merchandise (EGM) revenue increased +23% Y/Y to $17.13B, well below our $17.83B and consensus at $17.64B. Other revenue increased +50% Y/Y to $1.23B, in line with our / consensus estimates of $1.20B / $1.23B, largely driven by AWS gains.