Buy Amazon.com, Inc. (AMZN) Despite the Earnings Miss?

As you can see, VMware, Inc. (NYSE:VMW) generated 22% revenue growth and a 19.64% profit margin. VMware has a really strong balance of both revenue growth and profit margins. While International Business Machines Corp. (NYSE:IBM) focused on profits and has non-existent revenue growth. Amazon.com, Inc. (NASDAQ:AMZN), has the highest rates of revenue growth but a non-existent profit margin.

To be fair though IBM is trying to free itself from a dying hardware business, while Amazon.com, Inc. (NASDAQ:AMZN) is working with the momentum from its retail business. VMware, Inc. (NYSE:VMW), on the other hand, is a pure play on the cloud.

Given enough time, I think Amazon.com, Inc. (NASDAQ:AMZN) will transition to generating a profit from cloud (20% net profit margins seem to be reasonable). International Business Machines Corp. (NYSE:IBM), on the other hand, is being cannibalized by the cloud, but it will only be a matter of time before it grows revenue despite the cloud.

There still seems to be momentum in the cloud as VMware, Inc. (NYSE:VMW) provided guidance that revenue for the full year will be 15% to 18% higher. VMware announced $0.79 in earnings per share for the quarter, which beat analysts expectation set at $0.77.

Conclusion

Amazon.com, Inc. (NASDAQ:AMZN) reported a solid quarter despite the miss on earnings. The company isn’t going to generate a profit any time soon, which is fine because investors are buying the stock based on its revenue growth.

International Business Machines Corp. (NYSE:IBM) has been experiencing difficulty due to product cannibalization. But given enough time, industry trends show revenue should stabilize. The cloud can generate reasonable rates of revenue growth and profit so as long as it’s done properly, a good example of this is VMware, Inc. (NYSE:VMW). All three of these companies are worth a look.

The article Buy Amazon Despite the Earnings Miss? originally appeared on Fool.com and is written by Alexander Cho.

Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and VMware. The Motley Fool owns shares of Amazon.com, International Business Machines (NYSE:IBM)., and VMware. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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