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Category: Stock Market and Amazon
Date: 25 October 2019 Stock Price: $1780.78 We take a look at the 3rd 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. But the market didn't like the result and the stock was down 7% in after hours trade.
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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 3rd quarter 2019 earnings report
The numbers we are interested in (for the quarter):
- Net sales: $69.981 billion (up from $56.576 billion from the same quarter of the previous year)
- Net sales increased by 23.69% over the last 12 months
- Operating expenses: $66.824 billion (up from $52.852 billion for the same quarter of the previous year)
- Operating expenses increased by 26.4% over the last 12 months
- Net income: $2.134 billion (down from $2.883 billion for the same quarter of the previous year)
- Diluted earnings per share: $4.23 (down from $5.75 for the same quarter of the previous year)
- PE ratio of Amazon: 92.1
- PE ratio of Amazon: 92.1
- Diluted weighted-average shares outstanding: 504 million (up from 501 million for the same quarter of the previous year)
- Cash and cash equivalents: $23.255 billion
- Cash and cash equivalents per share: $46.14
- Cash and cash equivalents makes up 2.59% of Amazon's market capital
- Cash and cash equivalents makes up 11.68% of Amazon's total assets
- Inventories: $18.766 billion
- Inventories makes up 9.26% of Amazon's total assets
- Amazon's inventories grew by 9.26% over the last 12 months
- Accounts receivable: $16.877 billion
- Accounts receivable makes up 8.48% of Amazon's total assets
- Stockholders equity of Amazon: $56.508 billion
- Stockholders equity per share: $112.11
- Amazon is trading at 15.88 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: $7.892 billion
- Cash generated from operations per share: $15.66
Amazon's management commentary on their 3rd quarter results and earnings guidance
SEATTLE--(BUSINESS WIRE)--Oct. 24, 2019-- Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its third quarter ended September 30, 2019.
“We are ramping up to make our 25th holiday season the best ever for Prime customers — with millions of products available for free one-day delivery,” said Jeff Bezos, Amazon founder and CEO. “Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year. It’s a big investment, and it’s the right long-term decision for customers. And although it’s counterintuitive, the fastest delivery speeds generate the least carbon emissions because these products ship from fulfillment centers very close to the customer — it simply becomes impractical to use air or long ground routes. Huge thanks to all the teams helping deliver for customers this holiday.”
Business highlights for the 3rd quarter of 2019 for Amazon
Financial Guidance
The following forward-looking statements reflect Amazon.com’s expectations as of October 24, 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.
Fourth Quarter 2019 Guidance
“We are ramping up to make our 25th holiday season the best ever for Prime customers — with millions of products available for free one-day delivery,” said Jeff Bezos, Amazon founder and CEO. “Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year. It’s a big investment, and it’s the right long-term decision for customers. And although it’s counterintuitive, the fastest delivery speeds generate the least carbon emissions because these products ship from fulfillment centers very close to the customer — it simply becomes impractical to use air or long ground routes. Huge thanks to all the teams helping deliver for customers this holiday.”
Business highlights for the 3rd quarter of 2019 for Amazon
- Prime Video won 15 Emmy awards, with Fleabag receiving four Emmy awards, including Outstanding Comedy Series, as well as Outstanding Lead Actress in a Comedy Series and Outstanding Writing in a Comedy Series for Phoebe Waller-Bridge.
- Prime Video premiered four new Amazon Original series: The Boys, Carnival Row, Undone, and Modern Love. In addition, Prime Video will see the return of Tom Clancy’s Jack Ryan, starring John Krasinski, on November 1; The Man in the High Castle, from author Philip K. Dick, on November 15; The Marvelous Mrs. Maisel, recent winner of eight Emmy awards, on December 6; and the relaunch of the fan-favorite series The Expanse, with an all-new season four, on December 13.
- For the third consecutive season, Prime Video offers Prime members the ability to live stream NFL Thursday Night Football games. New features, such as Next Gen Stats on X-Ray, gives fans access to deeper analytics and allows football fans all over the globe to customize their Thursday Night Football streaming experience.
- Prime Video continues to create local Original Series around the world, including All or Nothing: Brazil National Football Team and Soltos em Floripa in Brazil; El Juego de las Llaves and Derbez Family Vacation in Mexico; LOL: Last One Laughing in Australia; Truth Seekers in the U.K.; Inside Borussia Dortmund in Germany; El Corazón de Sergio Ramos in Spain; The Family Man in India; and season three of The Bachelor in Japan.Amazon Web Services (AWS) announced several new customer commitments and major migrations during the quarter: Cerner Corporation selected AWS as its preferred artificial intelligence and machine learning provider to advance better patient health outcomes; The Globe and Mail and Old Mutual Limited selected AWS as their preferred cloud provider; Galanz, a leading manufacturer of electronic home appliances, selected AWS to enhance the consumer experience and expand its IoT platform in more than 200 countries; and in China, Huashan Hospital, affiliated with Fudan University, adopted AWS to accelerate digital transformation in order to reduce infrastructure costs and help the hospital improve its medical teaching and research.
- AWS announced the general availability of Amazon Forecast, a fully managed service that uses machine learning to deliver highly accurate forecasts based on the same technology used by Amazon. Amazon Forecast builds precise forecasts for virtually any business condition — including product demand and sales, infrastructure requirements, energy needs, and staffing levels — with predictions that are up to 50% more accurate than traditional methods. Amazon Forecast is easy to use and does not require machine learning experience.
Financial Guidance
The following forward-looking statements reflect Amazon.com’s expectations as of October 24, 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.
Fourth Quarter 2019 Guidance
- Net sales are expected to be between $80.0 billion and $86.5 billion, or to grow between 11% and 20% compared with fourth quarter 2018. This guidance anticipates an unfavorable impact of approximately 80 basis points from foreign exchange rates.
- Operating income is expected to be between $1.2 billion and $2.9 billion, compared with $3.8 billion in fourth 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 $305 and its currently trading at $1780.78. That's a impressive return of 483.86% 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 of $1307, which to us its an indication that the short term sentiment and momentum of Amazon is positive.
The concern for Amazon stockholders would be the strong negative reaction of Amazon's stock price after their 3rd quarter earnings release, which saw Amazon's stock decline by almost 7%
The concern for Amazon stockholders would be the strong negative reaction of Amazon's stock price after their 3rd quarter earnings release, which saw Amazon's stock decline by almost 7%
Recent coverage of Amazon Corporation
The extract below shows recent coverage of Amazon as obtained from TheStreet.com
Shares of Amazon (AMZN - Get Report) were falling sharply after hours Thursday after the company reported a wide third quarter earnings miss, as well as weaker-than-expected revenue guidance for the fourth quarter. TheStreet is live blogging Amazon's third quarter earnings report. Please join us!
Amazon reported earnings of $4.23 per share on revenue of $69.98 billion. Analysts were expecting the company to report earnings of $4.62 per share on revenue of $68.81 billion. And for the seasonally strong fourth quarter, Amazon said it expects revenue of $80 billion to $86.5 billion, below an $87.39 billion consensus estimate.
The big miss for Q3 was the company's AWS segment, which reported revenue of $9 billion, falling short of FactSet's consensus $9.1 billion estimate. Amazon shares were down more than 8% Thursday after-hours. The company also said expects operating income to fall sharply from the previous year, to between $1.2 billion and $2.9 billion from the $3.8 billion it reported last year.
Read the full article here
Shares of Amazon (AMZN - Get Report) were falling sharply after hours Thursday after the company reported a wide third quarter earnings miss, as well as weaker-than-expected revenue guidance for the fourth quarter. TheStreet is live blogging Amazon's third quarter earnings report. Please join us!
Amazon reported earnings of $4.23 per share on revenue of $69.98 billion. Analysts were expecting the company to report earnings of $4.62 per share on revenue of $68.81 billion. And for the seasonally strong fourth quarter, Amazon said it expects revenue of $80 billion to $86.5 billion, below an $87.39 billion consensus estimate.
The big miss for Q3 was the company's AWS segment, which reported revenue of $9 billion, falling short of FactSet's consensus $9.1 billion estimate. Amazon shares were down more than 8% Thursday after-hours. The company also said expects operating income to fall sharply from the previous year, to between $1.2 billion and $2.9 billion from the $3.8 billion it reported last year.
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 $1170.50 a stock (down slightly from our 2nd quarter 2019 earnings valuation). 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 $1170.50. So a good entry point into Amazon would be around $1053.50. We believe the hype around FAANG stocks are chasing these stocks up and it's getting driven higher due to momentum and not due to value or fundamentals. We expect the stock price of Amazon to pull back to levels closer to our target (full value) price in coming weeks and months. And we wonder if the strong negative market reaction to Amazon's earnings in after hours trade is the start of the decline to more realistic valuation levels.
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 $1170.50. So a good entry point into Amazon would be around $1053.50. We believe the hype around FAANG stocks are chasing these stocks up and it's getting driven higher due to momentum and not due to value or fundamentals. We expect the stock price of Amazon to pull back to levels closer to our target (full value) price in coming weeks and months. And we wonder if the strong negative market reaction to Amazon's earnings in after hours trade is the start of the decline to more realistic valuation levels.