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Category: Stock Market and Amazon (AMZN)
Date: 31 July 2020 Stock Price of Amazon: $3051.88 We take a look at the 2nd quarter earnings release of their 2020 fiscal year of the world's biggest online retailer and one of the biggest companies in the world in terms of market capital Amazon. The group saw net sales increase by 40.2% for the quarter compared to the same quarter of the previous year and reported a profit of $5.24 billion for the quarter.
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This was another highly unusual quarter, and I couldn’t be more proud of and grateful to our employees around the globe-Jeff Bezos, Amazon founder and CEO"
About Amazon Inc (AMZN)
Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa are some of the products and services pioneered by Amazon.
Amazon is currently one of the worlds largest companies in terms of market capital. And it forms part of the famed "FAANG" stocks. FAANG is an acronym for Facebook, Amazon, Apple, Netflix and Google.
Amazon is currently one of the worlds largest companies in terms of market capital. And it forms part of the famed "FAANG" stocks. FAANG is an acronym for Facebook, Amazon, Apple, Netflix and Google.
Overview of Amazon's 2nd quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise:
Segmental information regarding Amazon for their 2Q 2020:
- Net sales: $88.912 billion (up from $63.404 billion from the same quarter of the previous year)
- Net sales increased by 40.2% over the last 12 months
- Operating expenses: $83.069 billion (up from $60.320 billion for the same quarter of the previous year)
- Operating expenses increased by 37.7% over the last 12 months
- Some margin gains for Amazon as net sales increased at a faster rate than their cost and expenses
- Net income: $5.243 billion (up from $2.652 billion for the same quarter of the previous year)
- Diluted earnings per share: $10.30 (up from $5.22 for the same quarter of the previous year)
- PE ratio of Amazon:76.3 (this compared to the PE of the SP 500 around 23)
- Diluted weighted-average shares outstanding: 509 million (up from 503 million for the same quarter of the previous year)
- Cash and cash equivalents: $37.466 billion
- Cash and cash equivalents per share: $73.60
- Cash and cash equivalents makes up 2.4% of Amazon's market capital
- Cash and cash equivalents makes up 16.02% of Amazon's total assets
- Inventories: $19.577 billion
- Inventories makes up 7.6% of Amazon's total assets
- Accounts receivable: $19.918 billion
- Accounts receivable makes up 7.7% of Amazon's total assets
- Stockholders equity of Amazon: $73.728 billion
- Stockholders equity per share: $144.84
- Amazon is trading at 21.2 times its stockholders equity which is well outside the expected range of between 2 and 4 which most companies tend to trade at.
- For some perspective the average price to book value of firms in the S&P 500 is 3.7 times.
- Cash generated from operations: $20.606 billion
- Cash generated from operations per share: $40.48
Segmental information regarding Amazon for their 2Q 2020:
- Net sales: North America: $55.436 billion
- Net sales : International: $22.668 billion
- Net sales: Amazon Web Services (AWS) : $10.808 billion
Amazon's management commentary on their 2nd quarter 2020 earnings
SEATTLE—(BUSINESS WIRE) July 30, 2020—Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its second quarter ended June 30, 2020.
“This was another highly unusual quarter, and I couldn’t be more proud of and grateful to our employees around the globe,” said Jeff Bezos, Amazon founder and CEO. “As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand—purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners. We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, fulltime positions. And third-party sales again grew faster this quarter than Amazon’s first-party sales. Lastly, even in this unpredictable time, we injected significant money into the economy this quarter, investing over $9 billion in capital projects, including fulfillment, transportation, and AWS.”
“This was another highly unusual quarter, and I couldn’t be more proud of and grateful to our employees around the globe,” said Jeff Bezos, Amazon founder and CEO. “As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand—purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners. We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, fulltime positions. And third-party sales again grew faster this quarter than Amazon’s first-party sales. Lastly, even in this unpredictable time, we injected significant money into the economy this quarter, investing over $9 billion in capital projects, including fulfillment, transportation, and AWS.”
Financial Guidance
The following forward-looking statements reflect Amazon.com’s expectations as of July 30, 2020, and are subject to substantial uncertainty. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and customer spending, world events, the rate of growth of the Internet, online commerce, and cloud services, and the various factors detailed below. This guidance reflects our estimates as of July 30, 2020 regarding the impact of the COVID-19 pandemic on our operations, including those discussed above, and is highly dependent on numerous factors that we may not be able to predict or control, including: the duration and scope of the pandemic, including any recurrence; actions taken by governments, businesses, and individuals in response to the pandemic; the impact of the pandemic on global and regional economies and economic activity, workforce staffing and productivity, and our significant and continuing spending on employee safety measures; our ability to continue operations in affected areas; and consumer demand and spending patterns, as well as the effects on suppliers, creditors, and third-party sellers, all of which are uncertain. This guidance also assumes the impacts on consumer demand and spending patterns, including impacts due to concerns over the current economic outlook, will be in line with those experienced during the third quarter to date, and the additional assumptions set forth below. However, it is not possible to determine the ultimate impact on our operations for the third quarter, or whether other currently unanticipated direct or indirect consequences of the pandemic are reasonably likely to materially affect our operations.
Third Quarter 2020 Guidance
The following forward-looking statements reflect Amazon.com’s expectations as of July 30, 2020, and are subject to substantial uncertainty. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and customer spending, world events, the rate of growth of the Internet, online commerce, and cloud services, and the various factors detailed below. This guidance reflects our estimates as of July 30, 2020 regarding the impact of the COVID-19 pandemic on our operations, including those discussed above, and is highly dependent on numerous factors that we may not be able to predict or control, including: the duration and scope of the pandemic, including any recurrence; actions taken by governments, businesses, and individuals in response to the pandemic; the impact of the pandemic on global and regional economies and economic activity, workforce staffing and productivity, and our significant and continuing spending on employee safety measures; our ability to continue operations in affected areas; and consumer demand and spending patterns, as well as the effects on suppliers, creditors, and third-party sellers, all of which are uncertain. This guidance also assumes the impacts on consumer demand and spending patterns, including impacts due to concerns over the current economic outlook, will be in line with those experienced during the third quarter to date, and the additional assumptions set forth below. However, it is not possible to determine the ultimate impact on our operations for the third quarter, or whether other currently unanticipated direct or indirect consequences of the pandemic are reasonably likely to materially affect our operations.
Third Quarter 2020 Guidance
- Net sales are expected to be between $87.0 billion and $93.0 billion, or to grow between 24% and 33% compared with third quarter 2019. This guidance anticipates an unfavorable impact of approximately 20 basis points from foreign exchange rates.
- Operating income is expected to be between $2.0 billion and $5.0 billion, compared with $3.2 billion in third quarter 2019. This guidance assumes more than $2.0 billion of costs related to COVID-19.
- This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded.
Amazon (NASDAQ: AMZN) stock price history
The image below, obtained from Google, shows the stock price history of Amazon (NASDAQ: AMZN) over the last 5 years. And it's been a amazing time for Amazon (NASDAQ: AMZN). 5 years ago the stock was trading at around $536 and its currently trading at $3051.88.. That's a impressive return of 569% over the last 5 years.
The stock of Amazon is trading at a closer to its 52 week high of $3344.29 than it is to its 52 week low of $1626.03 which to us its an indication that the short sentiment and momentum of Amazon is very positive.
The stock of Amazon is trading at a closer to its 52 week high of $3344.29 than it is to its 52 week low of $1626.03 which to us its an indication that the short sentiment and momentum of Amazon is very positive.
Amazon (AMZN) stock vs Walmart (WMT) stock over the last 5 years
The image below shows the stock price performance of Amazon (AMZN) and Walmart (WMT) over the last 5 years. One a massive bricks and mortar retail shopping chain, the other the world's largest online retailers. The image shows that the stock price trends looks fairly similar, but thats due to the fact that the scaling of the two charts are totally different. Below the stock price returns provided by Amazon and Walmart over the last 5 years:
The online retailer Amazon has easily outperformed the bricks and mortar retailers, Walmart over the last 5 years
- Amazon: 569%
- Walmart: 100.7%
The online retailer Amazon has easily outperformed the bricks and mortar retailers, Walmart over the last 5 years
So Amazon (AMZN) stock is on the surge again.. Where is its support and resistance levels??
The image below shows suggested support and resistance levels for the stock price of Amazon (AMZN) as calculated using monthly pivot points
- Resistance 3: $3249.71
- Resistance 2: $3022.85
- Resistance 1: $2890.84
- Pivot: $2663.98
- Support 1: $2531.97
- Support 2: $2305.11
- Support 3: $2173.10
Recent coverage of Amazon (AMZN)
The extract below shows recent coverage of Amazon as obtained from Marketwatch.com
Amazon.com Inc. Chief Executive Jeff Bezos promised to spend expected profits amid a huge boost in sales related to the COVID-19 pandemic, but sales grew so fast that he ended up with record earnings instead. Amazon AMZN, +0.60% reported second-quarter profit of $5.2 billion, or $10.30 a share, Thursday afternoon, nearly doubling from $5.22 a share a year ago to a fresh quarterly record amid a huge boost in revenue. Amazon reported sales of $88.9 billion, up 40% from $63.4 billion a year prior and well ahead of Amazon’s prediction of $75 billion to $81 billion. Analysts on average had predicted earnings of $1.48 a share on sales of $81.45 billion.
Three months ago, Bezos said that he expected to spend billions in expected operating profit that is flooding in as Americans sheltered-in-place due to the coronavirus pandemic purchase more goods online and businesses spend more on cloud computing to support workers stuck at home. “If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” Bezos said in May.
Shareholders did not run away, however. Amazon’s stock has instead continued to run to record highs, gaining more than 24% in the past three months and pushing the company’s market capitalization higher than $1.5 trillion. Shares increased more than 4% in after-hours trading Thursday immediately following the release of the results.
Read the full article here
Amazon.com Inc. Chief Executive Jeff Bezos promised to spend expected profits amid a huge boost in sales related to the COVID-19 pandemic, but sales grew so fast that he ended up with record earnings instead. Amazon AMZN, +0.60% reported second-quarter profit of $5.2 billion, or $10.30 a share, Thursday afternoon, nearly doubling from $5.22 a share a year ago to a fresh quarterly record amid a huge boost in revenue. Amazon reported sales of $88.9 billion, up 40% from $63.4 billion a year prior and well ahead of Amazon’s prediction of $75 billion to $81 billion. Analysts on average had predicted earnings of $1.48 a share on sales of $81.45 billion.
Three months ago, Bezos said that he expected to spend billions in expected operating profit that is flooding in as Americans sheltered-in-place due to the coronavirus pandemic purchase more goods online and businesses spend more on cloud computing to support workers stuck at home. “If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” Bezos said in May.
Shareholders did not run away, however. Amazon’s stock has instead continued to run to record highs, gaining more than 24% in the past three months and pushing the company’s market capitalization higher than $1.5 trillion. Shares increased more than 4% in after-hours trading Thursday immediately following the release of the results.
Read the full article here
Amazon (NASDAQ:AMZN) latest stock valuation
So based on the 2nd quarter 2020 earnings report of Amazon (NASDAQ: AMZN) what do we value Amazon (AMZN) stock at? Based on their latest earnings report our valuation models provide a target price (full value price) for Amazon stock at $1480.20 a stock (up from our 1st quarter 2019 earnings valuation of Amazon). We therefore believe the stock of Amazon is overvalued.
We usually advise investors to look to enter a stock at least 10% below our target price (full value price) which in this case is $1290.70. So a good entry point into Amazon would be around $1332.20.
We expect the stock price of Amazon to pull back to levels closer to our target price (full value price) in coming weeks and months and since its trading at well above our suggested target price or entry price we rate the stock of Amazon as a SELL
We usually advise investors to look to enter a stock at least 10% below our target price (full value price) which in this case is $1290.70. So a good entry point into Amazon would be around $1332.20.
We expect the stock price of Amazon to pull back to levels closer to our target price (full value price) in coming weeks and months and since its trading at well above our suggested target price or entry price we rate the stock of Amazon as a SELL
Next earnings release of Amazon (AMZN)
It is expected that Amazon will release their 3rd quarter 2020 earnings report in late October 2020