The technical, narrow definition of this term is: an increase in the rate of profit a company makes on a product.
However in broader terms it can defined as: In long-term reference, a measure of a company’s net profit margin in the latest reported quarter divided by profit margin in the fiscal year previous. In short-term reference, a measure of a company’s net profit margin in the latest reported quarter divided by profit margin in the quarter immediately preceding.
So we can be talking about a specific product, or the net profit margins overall. We simply apply the term as narrowly or broadly as we like.
The news today applies to Amazon’s quarterly report.
The Amazon (AMZN) bull case has pivoted to a story of margin expansion from revenue growth after the company surprised analysts with better-than-expected profit margins during Q4. A number of firms are out with price target increases, citing margin expansion as a major factor. PT hikes: Barclays to $260 from $245; JPMorgan to $333 from $245; Baird to $325 from $300; BofA to $315 from $300; Credit Suisse to $334 from $301. AMZN +8.3% premarket to $281.62. – Seeking Alpha
In my opinion, I think overall Amazon is not doing as well as it appears, regardless of the news. I have a bearish outlook on the company, from observing their day to day operations. It is one of the few companies that I actually pay attention to. I do not consider their fundamentals good. On a technical standpoint if this trends up, you can still make money, since this news came out. But as a swing trader or long term investor, I think the fundamentals are just not there.