Amazon stock up 10% on a beat and raise: ‘the stock goes even higher’

August 03, 2023 04:07 PM PDT | By Invezz

Amazon stock up 10% on a beat and raise: ‘the stock goes even higher’ — Image source: Invezz

AWS topped estimates in Q2

Investors are particularly cheering a better-than-expected 12% annualised growth in Amazon Web Services that brought in $22.1 billion in revenue this quarter.

The multinational attributed 70% of its operating profit in Q2 to its cloud business. On Yahoo Finance Live, Rohit Kulkarni of Roth MKM said:

AWS has been working on a complete stack of AI offering. They have their own AWS AI chips that is between three-to-five-year lead versus Microsoft and Google. [Plus], AWS has the best data offering across all cloud vendors.

While AWS was still down sequentially, the fact that it came in ahead of estimates suggests that macro-dictated slowdown in cloud spending has now bottomed. Including after-hours, Amazon stock is up nearly 65% year-to-date.

Amazon stock is benefitting from ads sales

Another segment that stood out in the earnings release was advertising that generated a whopping $10.7 billion (up 22% YoY) in revenue for Amazon in the second quarter.

Analysts, in comparison, had called for $10.4 billion. Kulkarni also told folks at Yahoo Finance:

They’re taking share from larger advertising companies and smaller eCommerce providers. Advertising on Amazon, fulfilment by Amazon and Prime – that creates a moat that we won’t see break anytime soon.

On the downside, though, Amazon saw a 4.0% annualised growth in online stores sales versus a 6.5% increase expected.

Amazon Q2 earnings snapshot

Net income printed at $6.7 billion or 65 cents a share
Had $2.0 billion of loss a year ago or 20 cents per share
Revenue jumped 11% year-on-year to $134.4 billion
Consensus was 35 cents a share on $131.5 billion revenue

Strength in Amazon’s third-quarter earnings also suggests that its cost-cutting initiative is beginning to yield results (find out more). According to Roth’s Kulkarni:

Amazon is our top mega-cap pick. Six quarters in a row their headcount has decline. So, as we get to Q4, we should start to see retail margins ramp up and that brings the stock higher.

Kulkarni has a $155 price target on Amazon stock but is convinced that it can rip higher after today’s update.

Amazon also raised its future guidance

Amazon now forecasts sales to come in between $138 billion and $143 billion in its current quarter. Even the low-end of that range topped consensus by half a billion dollar.

Operating income, it added, will be in the range of $5.5 billion to $8.5 billion in Q3. Kulkarni concluded:

This is as emphatic a beat and raise as we’ve seen from Amazon in 18 months. Cloud growth has stabilised. That means we’re seeing an inflection in cloud. The moment people start to digest an inflection, the stock goes even higher.

According to Amazon, a bunch of its customers, including 3M and HSBC are using AI products from AWS. Last month, the eCommerce giant had its biggest “Prime Day” ever.

The post Amazon stock up 10% on a beat and raise: ‘the stock goes even higher’ appeared first on Invezz

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media LLC (Kalkine Media, we or us) and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures/music displayed/used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it, as necessary.