Amazon (AMZN) earnings release overview for the 2nd quarter of their 2021 fiscal year
Category: Amazon (AMZN)
Date: 2 August 2021 Stock Price of Amazon (AMZN): $3327.59 Market Capital of Amazon: $1.68 trillion We take a look at the 2nd quarter earnings release of their 2021 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 reported sales of $113.1 billion and net income of $7.78 billion for the 2nd quarter of their 2021 fiscal year.
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Over the past 18 months, our consumer business has been called on to deliver an unprecedented number of items, including PPE, food, and other products that helped communities around the world cope with the difficult circumstances of the pandemic - Andy Jassy, Amazon 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 2021 earnings report
2nd quarter 2021 earnings highlights
Segmental information regarding Amazon for their 2Q 2021:
- Operating cash flow increased 16% to $59.3 billion for the trailing twelve months, compared with $51.2 billion for the trailing twelve months ended June 30, 2020.
- Free cash flow decreased to $12.1 billion for the trailing twelve months, compared with $31.9 billion for the trailing twelve months ended June 30, 2020.
- Free cash flow less principal repayments of finance leases and financing obligations decreased to $0.6 billion for the trailing twelve months, compared with $21.3 billion for the trailing twelve months ended June 30, 2020.
- Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations decreased to $4.2 billion for the trailing twelve months, compared with $19.4 billion for the trailing twelve months ended June 30, 2020.
- Common shares outstanding plus shares underlying stock-based awards totaled 522 million on June 30, 2021, compared with 517 million one year ago.
- Net sales increased 27% to $113.1 billion in the second quarter, compared with $88.9 billion in second quarter 2020. Excluding the $2.5 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 24% compared with second quarter 2020.
- Operating income increased to $7.7 billion in the second quarter, compared with $5.8 billion in second quarter 2020.
- Net income increased to $7.8 billion in the second quarter, or $15.12 per diluted share, compared with $5.2 billion, or $10.30 per diluted share, in second quarter 2020.
Segmental information regarding Amazon for their 2Q 2021:
- Net sales: North America: $67.5 billion
- Net sales : International: $30.7 billion
- Net sales: Amazon Web Services (AWS) : $14.8 billion
Amazon's management commentary on their 2nd quarter 2021 earnings
SEATTLE—(BUSINESS WIRE) July 29, 2021—Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its second quarter ended June 30, 2021
“Over the past 18 months, our consumer business has been called on to deliver an unprecedented number of items, including PPE, food, and other products that helped communities around the world cope with the difficult circumstances of the pandemic. At the same time, AWS has helped so many businesses and governments maintain business continuity, and we’ve seen AWS growth reaccelerate as more companies bring forward plans to transform their businesses and move to the cloud,” said Andy Jassy, Amazon CEO. “Thank you to all of our passionate, innovative, mission-driven employees around the world for continuing to stay focused on delivering for customers—I am very excited to work with you as we invent and build for the future.”
Investing in Employee Safety and Providing Good Jobs
• Amazon announced a first-of-its-kind partnership with the National Safety Council, a 100-year-old nonprofit that protects workers on and off the job, to invent new ways of preventing musculoskeletal disorders (MSDs), the most common workplace injury in the U.S. The five-year effort aims to reduce MSDs across a variety of industries by engaging key stakeholders, conducting new research, inventing technology and processes, and scaling the results. Amazon is investing over $300 million into safety projects in 2021, including redesigning and retrofitting workstations, re-engineering cross-dock operations and powered-industrial-truck barriers, and implementing new safety control systems.
• In the UK, Amazon announced that it is creating more than 10,000 new corporate and operations jobs and investing £10 million over three years to train up to 5,000 employees in new skills.
• Amazon surpassed its commitment to hire 25,000 U.S. veterans and military spouses by 2021 and set a new commitment to hire an additional 100,000 veterans and military spouses by 2024.
• Amazon launched the Amazon Returnship program, a new initiative to help 1,000 experienced corporate professionals outside of Amazon who have been out of work for an extended period of time return to the workforce, including people who stopped working due to COVID-19, caregiving responsibilities, or medical circumstances. Amazon offers participants a paid, 16-week work opportunity with an abbreviated interview process, dedicated support, and personalized coaching and mentoring—as well as the possibility to transition into a full-time job at Amazon.
• Amazon introduced a new mental health benefit for all of its 950,000 U.S. employees, their families, and household members, which provides free access to personalized support, including one-on-one counseling and 24/7 crisis support.
• For the fourth year in a row, Amazon was included on the Disability Equality Index’s Best Places to Work for Disability Inclusion.
“Over the past 18 months, our consumer business has been called on to deliver an unprecedented number of items, including PPE, food, and other products that helped communities around the world cope with the difficult circumstances of the pandemic. At the same time, AWS has helped so many businesses and governments maintain business continuity, and we’ve seen AWS growth reaccelerate as more companies bring forward plans to transform their businesses and move to the cloud,” said Andy Jassy, Amazon CEO. “Thank you to all of our passionate, innovative, mission-driven employees around the world for continuing to stay focused on delivering for customers—I am very excited to work with you as we invent and build for the future.”
Investing in Employee Safety and Providing Good Jobs
• Amazon announced a first-of-its-kind partnership with the National Safety Council, a 100-year-old nonprofit that protects workers on and off the job, to invent new ways of preventing musculoskeletal disorders (MSDs), the most common workplace injury in the U.S. The five-year effort aims to reduce MSDs across a variety of industries by engaging key stakeholders, conducting new research, inventing technology and processes, and scaling the results. Amazon is investing over $300 million into safety projects in 2021, including redesigning and retrofitting workstations, re-engineering cross-dock operations and powered-industrial-truck barriers, and implementing new safety control systems.
• In the UK, Amazon announced that it is creating more than 10,000 new corporate and operations jobs and investing £10 million over three years to train up to 5,000 employees in new skills.
• Amazon surpassed its commitment to hire 25,000 U.S. veterans and military spouses by 2021 and set a new commitment to hire an additional 100,000 veterans and military spouses by 2024.
• Amazon launched the Amazon Returnship program, a new initiative to help 1,000 experienced corporate professionals outside of Amazon who have been out of work for an extended period of time return to the workforce, including people who stopped working due to COVID-19, caregiving responsibilities, or medical circumstances. Amazon offers participants a paid, 16-week work opportunity with an abbreviated interview process, dedicated support, and personalized coaching and mentoring—as well as the possibility to transition into a full-time job at Amazon.
• Amazon introduced a new mental health benefit for all of its 950,000 U.S. employees, their families, and household members, which provides free access to personalized support, including one-on-one counseling and 24/7 crisis support.
• For the fourth year in a row, Amazon was included on the Disability Equality Index’s Best Places to Work for Disability Inclusion.
Financial Guidance
The following forward-looking statements reflect Amazon.com’s expectations as of July 29, 2021, 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 29, 2021 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 of 2021 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 of 2021, or whether other currently unanticipated direct or indirect consequences of the pandemic are reasonably likely to materially affect our operations.
Third Quarter 2021 Guidance
• Net sales are expected to be between $106.0 billion and $112.0 billion, or to grow between 10% and 16% compared with third quarter 2020. This guidance anticipates a favorable impact of approximately 70 basis points from foreign exchange rates.
• Operating income is expected to be between $2.5 billion and $6.0 billion, compared with $6.2 billion in third quarter 2020. This guidance assumes approximately $1.0 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.
The following forward-looking statements reflect Amazon.com’s expectations as of July 29, 2021, 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 29, 2021 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 of 2021 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 of 2021, or whether other currently unanticipated direct or indirect consequences of the pandemic are reasonably likely to materially affect our operations.
Third Quarter 2021 Guidance
• Net sales are expected to be between $106.0 billion and $112.0 billion, or to grow between 10% and 16% compared with third quarter 2020. This guidance anticipates a favorable impact of approximately 70 basis points from foreign exchange rates.
• Operating income is expected to be between $2.5 billion and $6.0 billion, compared with $6.2 billion in third quarter 2020. This guidance assumes approximately $1.0 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 (AMZN) stock price chart over the last 5 years
The image below shows the stock price history of Amazon (NASDAQ: AMZN) over the last 5 years. And it's been a amazing time for Amazon (AMZN). Over the last 5 years the stock of Amazon has increased by 338% over the last 5 years. Thats returns NO investor would say no to
The stock of Amazon is trading at a closer to its 52 week high than it is to its 52 week low which is a clear 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 than it is to its 52 week low which is a clear 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: 338%
- Walmart: 100%
The online retailer Amazon has easily outperformed the bricks and mortar retailers, Walmart over the last 5 years
Amazon (AMZN) latest stock valuation
So based on the 2nd quarter 2021 earnings report of Amazon (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 $1930.10 a stock (up from our 1st quarter 2021 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 $1930.10. So a good entry point into Amazon would be around $1737
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 $1930.10. So a good entry point into Amazon would be around $1737
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 (AMZN) will release their 3rd quarter 2021 earnings report in late October 2021