Up circa 54% year to date, Amazon (AMZN) has tripled the satisfactorily blistering record 18% rise year-to-date performance over-delivered by the US S&P 500 benchmark.
Amazon stock with its weaving and wandering stock price, and its innovating and dehumanising business model deservedly ranks as one of the ultimate benchmarks on the US or any bloody market. And even when among its sometimes comparatively rudderless mega-tech peers, the company always has a goal and it always has a plan.
Foaming at the mouth this week, the average overly emotional Wall Street analyst has pegged founder Jeff Bezos’ monstrous internet enhancer to earn a quarterly 35 US cents per share (earnings per share or EPS) on revenue of US$131.47 billion.
This compares to last year’s loss of 20 US cents EPS on revenue of US$121.23 billion.
It’s a little ludicrous the bells and whistles AMZN has jingling around at the moment. I’ve become mesmerised by the speed, scope and strength of the Amazon Web Services (AWS) cloud platform, Amazon’s services segment. (So good we bought the company. Instead of waiting on outsourcing which wasn’t up to scratch, Team Bezos just went out and made them. And then made more, and sold them instead.)
That’s a business which is still revelling in exponential growth and steamrolled any slight recent weakness which could’ve but didn’t really pop up in the more recognised retail segment.
In a recent nutty press release from the AMZN casually scattershot comms team, CEO Andy Jassy actually summed things up pretty good:
“There’s a lot to like about how our teams are delivering for customers.”
This is a fun chart too…
The e-commerce innovator has built growth in hard times with a typically hard-nosed bottom-to-top strategy.
Lopping off the fat down low – cutting gigs and operating expenses and coming out on the Q2 stage appearing lighter, slimmer and with a come-thither cost profile which the punters believe will lend itself to faster earnings growth in the quarters ahead.
According to CMC Markets, the cloud computing juggernaut’s stupendous +50% share price ride so far in ’23 is likely in part due to Amazon’s recent investment in generative artificial intelligence (AI).
“By using generative AI to summarise product reviews and speed up deliveries, Amazon has effectively found solutions to streamline its processes and improve productivity. This may put AMZN stocks in the running when it comes to the best AI stocks as it might eventually figure out a way to further cut costs and improve operational profitability,” CMC suggests.
Bezos has been all clarity on wanting to make it easier to buy stuff and get it quick.
So the fundies might like the AI flavour this year, but innovation in the AI space doesn’t fast-track the process like – say – payments, and now they’re doing that too – something lots of other companies specialise in getting wrong.
“Amazon One is its all-new cashless palm payment technology that’s slowly rolling out across more than 400 Whole Foods Market store locations across America. These innovations contribute to the Amazon ecosystem and may get investors and traders to be more excited about the future growth of AMZN stock valuations” – that’s also from the mind of CMC Markets.
Prime candidate
Then there’s the Christmas-like Prime Day, full of twinkle-toes dance moves reminiscent of Jack Ma at his er, Prime.
July 11, was Prime Day.
In a release the company gushed that it was the ‘single largest sales day in (the) company history.’
Firstly, of course it was in fact a ‘two-day shopping event’, so kudos to the cunning mind behind those numbers.
AMZN says an off the hook army of Prime members snapped up “more than 375 million items worldwide”.
“(They also) saved more than US$2.5 billion on millions of deals across the Amazon store, helping make it the biggest Prime Day event ever.
“The first day of Prime Day was the largest sales day in Amazon’s history, and Prime members saved more this year than any other Prime Day event,” said a chap called Doug Herrington, CEO of Amazon Stores.
Back to business
Some of the recent cost-saving measures include shutting down unprofitable businesses, reducing its global headcount and reprioritising resources in an effort to right-size the business. The goal is to remain leaner and stronger. Amazon is expected to report Q2 earnings per share of 35 cents, which would be a massive increase from the year-ago loss of 20 cents.
With quarterly revenue pegged for circa US$131 billion – a near 10% increase on the same time last year – the excitement on Wall Street seems to be coming from just how much further this company could grow.
Profitability and margin profile are terrific, but the whole AWS business is the meat and potatoes right now. And it’s a hearty meal.
Barrons’ Eric Savitz adds that ebbing inflation and solid US consumer spend might go hand in hand for AMZN over the near-term which would just add further ballast.
The company’s ad business should benefit from firming spending, Savitz also reckons.
Next week, it’d be worth looking out for any refreshed plans on Amazon’s own AI game. The company already is developing LLMs, and offering a suite of tools for AI software to AWS customers.
Finally, just looking at the stock now – from a valuation perspective – it might not be the bargain it was six months ago, at +54%, but perhaps relative to the way the pros see it going, it is a mega-tech with mega-long-term upside.
Amazon will report its second-quarter earnings after the US markets close on 3 August (APAC time).