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Category: Stock Market and Amazon
Date: 28 September 2019 Stock Price: $1725.45 We take a look at the 2nd quarter earnings release of their 2019 fiscal year of the world's biggest online retailer and one of the biggest companies in the world in terms of market capital, Amazon.
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About Amazon
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 latest earnings report
The numbers we are interested in (for the quarter):
- Revenue: $63.404 billion (up from $52.886billion from the same quarter of the previous year)
- Revenue increased by 19.8% over the last 12 months
- Operating expenses: $60.320 billion (up from $49.903 billion for the same quarter of the previous year)
- Operating expenses increased by 20.8% over the last 12 months
- Net income: $2.625 billion (up from $2.534 billion for the same quarter of the previous year)
- Diluted earnings per share: $5.22 (down from $5.07 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 503 million (up from 500 million for the same quarter of the previous year)
- Cash and cash equivalents: $31.750 billion
- Cash and cash equivalents per share: $63.50
- Cash and cash equivalents makes up 3.68% of Amazon's market capital
- Cash and cash equivalents makes up 19.52% of Amazon's total assets
- Inventories: $17.174 billion
- Inventories makes up 10.55% of Amazon's total assets
- Accounts receivable: $16.677 billion
- Accounts receivable makes up 10.25% of Amazon's total assets
- Stockholders equity of Amazon: $43.549 billion
- Stockholders equity per share: $87.098
- Amazon is trading at 13.47 times its stockholders equity which is well outside the expected range of between 2 and 4 which most companies tend to trade at.
- Cash generated from operations: $1.629 billion
- Cash generated from operations per share: $3.26
Amazon's management commentary on the results and earnings guidance
SEATTLE--(BUSINESS WIRE)--Jul. 25, 2019-- Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its second quarter ended June 30, 2019.
“Customers are responding to Prime’s move to one-day delivery — we’ve received a lot of positive feedback and seen accelerating sales growth,” said Jeff Bezos, Amazon founder and CEO. “Free one-day delivery is now available to Prime members on more than ten million items, and we’re just getting started. A big thank you to the team for continuing to make life easier for customers.”
Prime Day was once again the largest shopping event in Amazon history with more than one million deals exclusively for Prime members. Over the two days of Prime Day, on July 15 and 16, sales surpassed the previous Black Friday and Cyber Monday combined. Prime Day was also the biggest event ever for Amazon devices, when comparing two-day periods. Amazon welcomed more new Prime members on July 15 than any previous day, and almost as many on July 16 — making these the two biggest days ever for member signups. In addition, Prime members received tens of millions of dollars in savings when shopping from Whole Foods Market and bought more than $2 billion of products from independent small and medium-sized businesses. Millions of people worldwide streamed Prime Day events, including the Prime Day Concert presented by Amazon Music and headlined by 10-time GRAMMY Award-winning artist Taylor Swift.
Financial Guidance
The following forward-looking statements reflect Amazon.com’s expectations as of July 25, 2019, 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.
Third Quarter 2019 Guidance
“Customers are responding to Prime’s move to one-day delivery — we’ve received a lot of positive feedback and seen accelerating sales growth,” said Jeff Bezos, Amazon founder and CEO. “Free one-day delivery is now available to Prime members on more than ten million items, and we’re just getting started. A big thank you to the team for continuing to make life easier for customers.”
Prime Day was once again the largest shopping event in Amazon history with more than one million deals exclusively for Prime members. Over the two days of Prime Day, on July 15 and 16, sales surpassed the previous Black Friday and Cyber Monday combined. Prime Day was also the biggest event ever for Amazon devices, when comparing two-day periods. Amazon welcomed more new Prime members on July 15 than any previous day, and almost as many on July 16 — making these the two biggest days ever for member signups. In addition, Prime members received tens of millions of dollars in savings when shopping from Whole Foods Market and bought more than $2 billion of products from independent small and medium-sized businesses. Millions of people worldwide streamed Prime Day events, including the Prime Day Concert presented by Amazon Music and headlined by 10-time GRAMMY Award-winning artist Taylor Swift.
Financial Guidance
The following forward-looking statements reflect Amazon.com’s expectations as of July 25, 2019, 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.
Third Quarter 2019 Guidance
- Net sales are expected to be between $66.0 billion and $70.0 billion, or to grow between 17% and 24% compared with third quarter 2018. This guidance anticipates an unfavorable impact of approximately 30 basis points from foreign exchange rates.
- Operating income is expected to be between $2.1 billion and $3.1 billion, compared with $3.7 billion in third quarter 2018.
- 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 $322 and its currently trading at $1725.45. That's a impressive return of 436% over the last 5 years. The stock is trading at closer to its 52 week high of $2035 than it is to its 52 week low. To us its an indication that the short term sentiment and momentum of Amazon is still positive.
Recent coverage of Amazon Corporation
The extract below shows recent coverage of Amazon as obtained from Zacks
Amazon (AMZN - Free Report) has had a busy couple of days. The e-commerce giant held their annual hardware event on Wednesday in Seattle a day after they announced they would be taking their biggest step yet into healthcare by launching its Amazon Care service for its Seattle employees. Amazon has given prior hints into its interest into diving into the $3.7 trillion market. It is using its Seattle employees as a trial run for their latest healthcare initiative. The firm unveiled new products and features to eager consumers at their annual event.
Amazon Care
As previously mentioned, Amazon’s latest move into healthcare comes as no surprise, as the firm has been making strategic moves over the past few years. Amazon acquired the online pharmacy company Pillpack last June for $1 billion and formed a joint venture with Berkshire Hathaway and JPMorgan Chase (JPM - Free Report) called Haven, which aims to shake up the healthcare industry. The company has given its AI product, Alexa, some healthcare skills like notifying users when subscriptions need to be filled and provides information on users’ blood sugar levels.
Amazon Care attempts to give consumers the best of both worlds by combining traditional in-person and virtual healthcare. The firm’s new healthcare service provides urgent care for things like colds and infections. They also offer preventative wellness consultations and lab tests, testing for sexually transmitted diseases, and answers to general health questions.
The company then gives these traditional healthcare services a modern twist. Amazon Care offers an in-app chatroom that would connect users seeking medical advice to certified nurses within minutes. The service would also provide clients with video-based appointments with doctors who can provide a diagnosis and recommended treatments for patients. In addition, in-home or in-office visits with medical professionals would also be offered and prescription drug orders would be delivered in as little as two hours.
Read the full article here
Amazon (AMZN - Free Report) has had a busy couple of days. The e-commerce giant held their annual hardware event on Wednesday in Seattle a day after they announced they would be taking their biggest step yet into healthcare by launching its Amazon Care service for its Seattle employees. Amazon has given prior hints into its interest into diving into the $3.7 trillion market. It is using its Seattle employees as a trial run for their latest healthcare initiative. The firm unveiled new products and features to eager consumers at their annual event.
Amazon Care
As previously mentioned, Amazon’s latest move into healthcare comes as no surprise, as the firm has been making strategic moves over the past few years. Amazon acquired the online pharmacy company Pillpack last June for $1 billion and formed a joint venture with Berkshire Hathaway and JPMorgan Chase (JPM - Free Report) called Haven, which aims to shake up the healthcare industry. The company has given its AI product, Alexa, some healthcare skills like notifying users when subscriptions need to be filled and provides information on users’ blood sugar levels.
Amazon Care attempts to give consumers the best of both worlds by combining traditional in-person and virtual healthcare. The firm’s new healthcare service provides urgent care for things like colds and infections. They also offer preventative wellness consultations and lab tests, testing for sexually transmitted diseases, and answers to general health questions.
The company then gives these traditional healthcare services a modern twist. Amazon Care offers an in-app chatroom that would connect users seeking medical advice to certified nurses within minutes. The service would also provide clients with video-based appointments with doctors who can provide a diagnosis and recommended treatments for patients. In addition, in-home or in-office visits with medical professionals would also be offered and prescription drug orders would be delivered in as little as two hours.
Read the full article here
Amazon (NASDAQ:AMZN) latest stock valuation
So based on the 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 $1220 a stock. We therefore believe the stock of Amazon is overvalued.
We would not advise long term fundamental or value investors buy into the stock of Amazon at its current price levels. Rather look to enter the stock of Amazon at least 10% below our target (full value) price of $1220. So a good entry point into the stock would be around $1098. We believe the hype around FAANG stocks are chasing the stocks up and it's getting driven higher due to momentum and not due to value or fundamentals.
We would not advise long term fundamental or value investors buy into the stock of Amazon at its current price levels. Rather look to enter the stock of Amazon at least 10% below our target (full value) price of $1220. So a good entry point into the stock would be around $1098. We believe the hype around FAANG stocks are chasing the stocks up and it's getting driven higher due to momentum and not due to value or fundamentals.