Big Stories Under the US Earnings Season – Amazon and Microsoft in Discussion

  • Oct 28, 2019 AEDT
  • Team Kalkine
Big Stories Under the US Earnings Season – Amazon and Microsoft in Discussion

The US earnings season is here, company books are out in the open, and investors have got some work to do.

But what are we here for?

We bring into light two stocks out of the most talked-about stocks on NASDAQ, AMZN and MSFT.

Amazon.com, Inc. (NASDAQ: AMZN)

Headquartered in Seattle, Washington, Amazon.com, Inc. (NASDAQ: AMZN) is amongst the most popular worldwide for its online retail business. However, Amazon delivers into multiple businesses through electronic book readers and Web services that were a breakthrough in the electronic commerce industry.

Amazon is a large-scale internet-based company reaching millions of customers worldwide. Amazon has expanded significantly over the years and multiplying its business into multiple verticals by selling sells books, music, movies, housewares, electronics, toys, and many other goods, either directly or as a catalyst to other retailers on its website.

AMZN traded at $1761.33

As of 25 October 2019, the AMZN Common Stock last traded at $1761.33, down by 1.09% from its last close. For a period of last six months, the AMZN stock has witnessed a decrease of $121.47 as on 24 October 2019. Also, AMZN stock was noted at $1902.25 as on 25 April 2019.

AMZN Net Sales up by 24%

Amazon recently notified on financial report for the third quarter (closed 30 September 2019) on 24 October 2019. Notable financial highlights from the company’s quarterly performance are given below:

  • Operating cash flow increased 33% to $35.3 billion for the trailing twelve months, compared with $26.6 billion for the trailing twelve months ended 30 September 2018;
  • Free cash flow increased to $23.5 billion for the trailing twelve months, compared with $15.4 billion for the trailing twelve months ended 30 September 2018;
  • Common shares outstanding plus shares underlying stock-based awards totalled 511 million on September 30, 2019, compared with 507 million one year ago;
  • Net sales increased 24% to $70.0 billion in the third quarter, compared with $56.6 billion in the third quarter of 2018;
  • Operating income decreased to $3.2 billion in the third quarter, compared with operating income of $3.7 billion in the third quarter of 2018;
  • Net income decreased to $2.1 billion in the third quarter, or $4.23 per diluted share, compared with net income of $2.9 billion, or $5.75 per diluted share, in third quarter 2018;

As per the forward-looking statement of Amazon for the third quarter 2019, net sales were expected to grow between 17% and 24% (between $66.0 billion and $70.0 billion) as compared to the third quarter of 2018. The company is clearly on track with the anticipated growth objectives, signifying amazon’s commitment to operational excellence.

Figure 1 Consolidated Statements of Comprehensive Income of Amazon (Source: Company's Report)

Amazon’s founder and CEO Jeff Bezos said-

“We are ramping up to make our 25th holiday season the best ever for Prime customers — with millions of products available for free one-day delivery”

Moreover, the CEO believes that it is a huge investment, but the company is focused on the long-term decision for its customers.

AMZN Expects 11%- 20% Sales Growth for Q4

The expectations of Amazon as of 24 October 2019 are given below (subject to substantial uncertainty):

  • Amazon expects net sales to grow between 11% and 20% (between $80.0 billion and $86.5 billion, or to) compared with fourth quarter FY18;
  • Based on the above guidance, Amazon anticipates an unfavourable impact of approximately 80 basis points from foreign exchange rates;
  • The operating income is expected to be between $1.2 billion and $2.9 billion, compared with $3.8 billion in the fourth quarter of FY18;
  • The above guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded.
Fresh Additions to Product Line

Other than the improvement in sales, Amazon has been equally focused on improving its product line and services. As a result, Amazon announced various additions to its product and service portfolio including-

  • A fresh line up of Echo devices
  • 20 new Fire TV products
  • A line-up of content for Fire TV customers
  • New Alexa smart home features and products
  • An integration with Discovery that brings the new Food Network Kitchen service to Amazon devices and makes Alexa the exclusive voice service for Food Network
  • Amazon Sidewalk (a low bandwidth, highly secure network)
  • eero mesh Wi-Fi system offering simple, reliable Wi-Fi for streaming, gaming, and working from home
  • Amazon Music HD, a new tier of premium quality music with more than 50 million songs in high definition
  • Personal Shopper by Prime Wardrobe in the U.S.

Paralleling, with its principle of “customer obsession rather than competitor focus”, Amazon made several announcements under its Amazon Web Services vertical. “Passion for invention” and “commitment to operational excellence” are other core principles of Amazon.

These are evident from the long stretching range of products developed by the amazon, coupled with a big appetite for innovation and technological enhancements.

Amazon highly believes in long-term thinking and sustainable development. Inching a step closer to Amazon’s Climate Pledge to reach 80% Renewable Energy by the year 2024 and 100% renewable energy by the year 2030, Amazon recently announced three new renewable energy projects in the US and UK.

Let us now talk about the global tech giant Microsoft.

Microsoft Corp. (NASDAQ: MSFT)

As a global tech giant and a leader in software systems and applications development, Microsoft Corp. (NASDAQ: MSFT) believes in creation of a technology that brings benefits to everyone on the planet and the planet itself. Microsoft strives to inject productivity, competitiveness, effectiveness and efficiency into other business partners through its products and services.

MSFT Revenue up by 14%

As per the earnings report for Q1 FY20, Microsoft has continued its revenue-streak and experienced a 14% increase in its revenue. The revenue for the quarter amounted to $33.1 billion. On the operating income front, NSFT attained a figure of $12.7 billion, which represents an increase of 27% as compared to the corresponding period of last fiscal year.

Microsoft has endured tremendous progress and has been strengthening its impact over the past years. Microsoft provides leverage to other organizations of every size and in every industry globally, to innovate and prosper using Microsoft’s products and services.

MSFT Eyeing Technology Breakthroughs

Moreover, Microsoft is continuously innovating to enable its customers and investing in large and growing markets to catalyse their digital transformation. Some of the technology breakthroughs that Microsoft looks forward to are:

  • Building Azure as the world’s computer, addressing customers’ real-world operational sovereignty and regulatory needs;
  • Investing to build the most complete toolchain for developers;
  • Democratising AI infrastructure, tools, and services with Azure Cognitive Services, so any developer can embed the ability to see, hear, respond, translate, reason, and more into their applications;
  • Bringing Teams for the first time to healthcare, hospitality, and retail, as well as first line workers.

Other than product innovation, enhancement and delivery, Microsoft also addresses much sensitive areas of customer relations. Microsoft feels highly responsible about gaining and enduring the trust of its customers and partners and focuses on managing their privacy and cybersecurity.

We have got Microsoft’s financial performance and operational achievements covered here.

MSFT stock traded at $140.73

As of 25 October 2019, the MSFT Common Stock last traded at $140.73, up 0.56% from its previous close. Over the period of last six months, the MSFT stock has witnessed an increase of $10.79 as on 24 October 2019. Also, MSFT stock was noted at $129.15 as on 25 April 2019.


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