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Category: Stock Market and Amazon (AMZN)
Date: 30 October 2020 Stock Price of Amazon: $3211.01 We take a look at the 3rd 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 reported revenue of $96.145 billion and net income of $6.331 billion for the 3rd quarter of their 2020 fiscal year.
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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 3rd quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise:
Segmental information regarding Amazon for their 3Q 2020:
- Net sales: $96.145 billion (up from $69.981 billion from the same quarter of the previous year)
- Net sales increased by 37.3% over the last 12 months
- Operating expenses: $89.951 billion (up from $66.824 billion for the same quarter of the previous year)
- Operating expenses increased by 34.6% 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: $6.331 billion (up from $2.652 billion for the same quarter of the previous year)
- Diluted earnings per share: $12.37 (up from $4.23 for the same quarter of the previous year)
- PE ratio of Amazon: 88.9 (this compared to the PE of the SP 500 around 25)
- Diluted weighted-average shares outstanding: 512 million (up from 504 million for the same quarter of the previous year)
- Cash and cash equivalents: $29.9 billion
- Cash and cash equivalents per share: $58.4
- Cash and cash equivalents makes up 1.8% of Amazon's market capital
- Cash and cash equivalents makes up 10.6% of Amazon's total assets
- Inventories: $23.735 billion
- Inventories makes up 8.4% of Amazon's total assets
- Accounts receivable: $20.832 billion
- Accounts receivable makes up 7.4% of Amazon's total assets
- Stockholders equity of Amazon: $82.775 billion
- Stockholders equity per share: $161.7
- Amazon is trading at 19.8 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 3.8 times.
- Cash generated from operations: $7.892 billion
- Cash generated from operations per share: $15.41
Segmental information regarding Amazon for their 3Q 2020:
- Net sales: North America: $59.373 billion
- Net sales : International: $25.171 billion
- Net sales: Amazon Web Services (AWS) : $11.601 billion
Amazon's management commentary on their 3rd quarter 2020 earnings
SEATTLE—(BUSINESS WIRE) October 29, 2020—Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its third quarter ended September 30, 2020.
“Two years ago, we increased Amazon’s minimum wage to $15 for all full-time, part-time, temporary, and seasonal employees across the U.S. and challenged other large employers to do the same. Best Buy and Target have stepped up, and we hope other large employers will also make the jump to $15. Now would be a great time,” said Jeff Bezos, Amazon founder and CEO. “Offering jobs with industry-leading pay and great healthcare, including to entry-level and front-line employees, is even more meaningful in a time like this, and we’re proud to have created over 400,000 jobs this year alone. We’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season. Big thank you to our employees and selling partners around the world who’ve been busy getting ready to deliver for customers this holiday.”
“Two years ago, we increased Amazon’s minimum wage to $15 for all full-time, part-time, temporary, and seasonal employees across the U.S. and challenged other large employers to do the same. Best Buy and Target have stepped up, and we hope other large employers will also make the jump to $15. Now would be a great time,” said Jeff Bezos, Amazon founder and CEO. “Offering jobs with industry-leading pay and great healthcare, including to entry-level and front-line employees, is even more meaningful in a time like this, and we’re proud to have created over 400,000 jobs this year alone. We’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season. Big thank you to our employees and selling partners around the world who’ve been busy getting ready to deliver for customers this holiday.”
Financial Guidance
The following forward-looking statements reflect Amazon.com’s expectations as of October 29, 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 October 29, 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 fourth 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 fourth quarter, or whether other currently unanticipated direct or indirect consequences of the pandemic are reasonably likely to materially affect our operations.
Fourth Quarter 2020 Guidance
The following forward-looking statements reflect Amazon.com’s expectations as of October 29, 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 October 29, 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 fourth 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 fourth quarter, or whether other currently unanticipated direct or indirect consequences of the pandemic are reasonably likely to materially affect our operations.
Fourth Quarter 2020 Guidance
- Net sales are expected to be between $112.0 billion and $121.0 billion, or to grow between 28% and 38% compared with fourth quarter 2019. This guidance anticipates a favorable impact of approximately 90 basis points from foreign exchange rates.
- Operating income is expected to be between $1.0 billion and $4.5 billion, compared with $3.9 billion in fourth quarter 2019. This guidance assumes approximately $4.0 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 over the last 5 years
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: 376.9%
- Walmart: 133.6%
The online retailer Amazon has easily outperformed the bricks and mortar retailers, Walmart over the last 5 years
Recent coverage of Amazon (AMZN)
The extract below shows recent coverage of Amazon as obtained from SeekingAlpha.com
Read the full article here
- In the midst of a global pandemic, Amazon's growth engine (AWS Cloud and Ad business) continues to motor on unabated and now generates more free cash flow than ever before.
- The latest quarterly report highlights the immense resilience of Amazon's business, and I expect its stock to remain a market outperformer for the next decade.
- This article will focus on the long-term implications of Q3 results, and I will provide an updated valuation and projected return for the company.
- Furthermore, Amazon investors are well-positioned to weather a prolonged recession due to its unique business mix of consumer staples, consumer discretionary, cloud, digital advertising, and streaming.
- The COVID-19 pandemic is showing no signs of going away; however, the big tech companies continue to win. Hence, they are the new safe-haven stocks. Thus, I rate Amazon a buy at $3200
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 $1720.80 a stock (up from our 2nd quarter 2020 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 $1720.80. So a good entry point into Amazon would be around $1548
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 $1720.80. So a good entry point into Amazon would be around $1548
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 4th quarter 2020 earnings report in late Janaury 2021