Is Amazon a Buy Sell or Hold With AI Business Updates and Financials

Amazon's financials have been a mixed bag in recent years. The company's revenue has consistently grown, reaching $386 billion in 2020.

Amazon's net income has fluctuated, but it's worth noting that the company has been investing heavily in new initiatives, such as AI and cloud computing. This investment has led to a significant increase in research and development expenses.

Amazon's AI business has been a key driver of growth, with the company's AI-powered services generating $13.3 billion in revenue in 2020. This represents a 30% increase from the previous year.

Amazon's financials have been impacted by the COVID-19 pandemic, with the company's net income declining in 2020 due to increased costs related to the pandemic.

Amazon's performance has been impressive, with a 59% beat in EPS estimates and a $1.6 billion revenue beat in the third quarter of 2023. This is not an isolated incident, as the company has outperformed earnings estimates by a wide range of 18% to 59% over the last four quarters.

Amazon's revenue growth has been steady, with a 9.9% increase from year-ago numbers expected in the third quarter. The company's guidance of 8% to 11% growth from year-ago numbers of $143.1 billion is also promising.

However, the company's recent revenue miss in the second quarter is a concern, but it's worth noting that Amazon has beaten its own revenue guidance and analysts' revenue estimates in three out of the last four quarters. A third-quarter earnings beat is likely in the cards, given Amazon's EPS beats for four quarters in a row and just one miss over the past eight quarters.

Here's a summary of Amazon's recent performance:

Amazon's upcoming third-quarter earnings print will include sales from the Prime Day 2024, which the company called "its biggest Prime Day shopping event ever, with record sales." This could be a significant catalyst for the company's revenue growth.

Amazon's performance history is a tale of consistent beats and occasional misses. Over the last four quarters, Amazon has outperformed earnings estimates by a wide range of 18% to 59%.

In fact, Amazon has beaten its own guidance and analysts' revenue estimates in three out of the last four quarters. A third-quarter earnings beat is likely in the cards, given Amazon's EPS beats for four quarters in a row and just one miss over the past eight quarters.

Amazon's revenue growth has been steady, with a 9.9% increase in the third quarter of this year, compared to the same period last year. However, the company's revenue guidance for the third quarter fell below the consensus estimate, causing the stock to dip.

Here's a breakdown of Amazon's earnings beats over the last four quarters:

Amazon's operating income has also been a highlight, with a $11.5 billion to $15 billion guidance for the third quarter, compared to $11.2 billion in the same period last year. The company's operating margin has consistently been stronger than anticipated, with an 11.0% margin in the third quarter.

Amazon has consistently outperformed earnings estimates over the last four quarters, with a wide range of 18% to 59% beat in each quarter. This trend suggests that Amazon is likely to beat analyst estimates in the third quarter.

Analysts expect Amazon to report EPS of $1.14 on revenues of $157.2 billion, representing increases of 21.3% and 9.9%, respectively, from year-ago numbers. However, Amazon guided third-quarter net sales to be between $154 billion and $158.5 billion, which is below the consensus estimate.

Amazon has beaten its own revenue guidance and analysts' revenue estimates in three out of the last four quarters. A third-quarter earnings beat is likely in the cards, given Amazon's EPS beats for four quarters in a row and just one miss over the past eight quarters.

Here are some key statistics that support Amazon's potential to beat analyst estimates in Q3:

Note that while Amazon's recent revenue miss in Q2 may be a concern, the company has consistently beaten analyst estimates in terms of EPS. This suggests that Amazon's strong earnings performance is likely to continue in Q3.

Amazon's AI business is growing rapidly, with a multibillion-dollar revenue run rate, despite being in the early stages of growth.

The company's customized silicon technology is a key driver of this growth, as it powers AI and is more cost-effective than Nvidia's chips.

Amazon's Trainium AI chips for training AI models are in high demand, thanks to their competitive performance and lower cost.

In fact, Trainium is 40% cheaper than other hardware offerings, making it an attractive option for businesses looking to build their own AI capabilities.

Databricks has partnered with Amazon to use Trainium AI chips in a service designed to help companies customize or create their own AI models, under a five-year deal.

This partnership could cut costs for businesses, as Amazon's AI chips are cheaper than other hardware offerings.

NinjaTech AI, which builds AI agents, uses Amazon's Trainium processors and has seen significant cost savings, with a cloud-services bill of about $250,000 per month, compared to $750,000 to $1.2 million with Nvidia's GPUs.

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Amazon's Graviton4 chips outperform other x86 processors at 20% lower price points, while customers enjoy 40% to 50% price performance gains, use less electricity, and improve their carbon footprint.

The company plans to launch the next version of its Trainium processors by the end of this year, which could further accelerate the growth of its AI business.

Amazon's growth drivers and catalysts are numerous, and here are some of the key factors to consider.

Prime Video ads are expected to drive growth in online advertising revenues, with rising viewership and rollout in additional geographies in 2025.

Amazon's AWS business is accelerating revenue growth, with a strong backlog and increased enterprise spending on infrastructure modernization acting as tailwinds.

The Kuiper satellite internet project presents a compelling market opportunity, despite looming FCC timeline and ballooning costs.

Amazon's home-grown processors can drive AI growth, offering businesses improved price-performance alternatives.

New rules targeting China shipments may favor Amazon's e-commerce business.

Here's a breakdown of some of the key growth drivers and catalysts:

Amazon Prime Day and the key holiday shopping season are perennial catalysts for growth, driving sales and revenue for the company.

Amazon's financials are a key consideration when deciding whether to buy, sell, or hold the stock. The company has a TTM revenue of $620.13 billion and a profit margin of 8.04%, indicating a strong and growing business.

Amazon's profitability metrics are also impressive, with a return on equity (ROE) of 22.56% and a return on assets (ROA) of 7.07%. This suggests efficient asset management and strong returns for shareholders.

Amazon has a substantial free cash flow of $54.33 billion, which justifies the premium price of its stock. With a P/E ratio of 44.64, Amazon's stock may seem overvalued, but its earnings per share (EPS) of 4.68 and free cash flow support its premium price.

Amazon's financials are a testament to its growth and stability. With a TTM of $620.13 billion, the company has a significant presence in the market.

Amazon's profit margin stands at 8.04%, indicating a steady increase in profitability over time. In terms of profitability metrics, Amazon boasts a return on equity (ROE) of 22.56% and a return on assets (ROA) of 7.07%, demonstrating efficient asset management and strong returns for shareholders.

The company has a substantial free cash flow of $54.33 billion, which justifies the premium price of its stock. Amazon's P/E ratio of 44.64 may seem high, but its earnings per share (EPS) of 4.68 justify the investment.

Amazon's financial positions are also satisfying, with $88.05 billion in cash that more than covers its active and long-term investments. The debt to equity ratio of 61.18% is reasonable, showing a strong structure and the capability of funding future aggressive growth.

Here's a summary of Amazon's key financial metrics:

Amazon remains the largest online retailer in the U.S. and generates a bulk of its revenues from its legacy retail business, which has come under pressure due to the growth of Chinese shopping apps like Temu and Shein.

Temu and Shein are online marketplaces that deliver products directly from manufacturers to American customers at ultra-low price points, undercutting competition. Their growth is mainly attributed to the 'de minimis' rule that exempts packages valued under $800 from custom duties and taxes.

In 2023, the volume of de minimis shipments reached over a billion, up from approximately 140 million in 2013, based on White House estimates. Each package has a value well below $800, making it eligible for the de minimis exemption.

The U.S. has proposed fresh regulations to address the misuse of the 'de minimis' rule, which could lead to a drastic reduction in de minimis shipments. The EU is also exploring similar measures against low-value shipments.

Amazon is reportedly considering its own direct-to-consumer business, taking advantage of the de minimis rule to sell items below $20.

Most analysts covering Amazon stock are bullish, with 94% having a buy rating and no sell ratings, indicating a positive sentiment.

The average price target for Amazon stock is $219, representing nearly 16% upside from the current price. This suggests that analysts believe Amazon's stock has room to grow.

Goldman Sachs analyst Eric Sheridan expects Amazon's third-quarter earnings report to reflect relatively stable eCommerce demand and strong performance in advertising. He also expects continued acceleration for AWS.

Wedbush analysts reiterated an Outperform rating and $225 price target for the stock, citing Amazon's transition to higher-margin advertising and AWS revenue growth. They also expect Amazon's operating income to grow at a 20% compound annual growth rate over the next five years.

However, not all analysts are optimistic. Wells Fargo Securities analyst Ken Gawrelski has downgraded Amazon stock from overweight to equal weight, citing headwinds such as investments in Project Kuiper and rising pressures from Fulfillment by Amazon fees.

Despite this, Amazon's stock has been performing well, with a 3.4% increase since Cathie Wood's Ark Innovation ETF bought 76,505 shares of Amazon worth around $14 million. This suggests that investor sentiment is not negative, with less than 1% of the outstanding shares of AMZN being short.

Analysts expect Amazon to benefit from the holiday season, with e-commerce spending projected to reach $240.8 billion from November 1 through December 31, an 8.4% increase from the same period in 2023.

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Amazon's earnings report is scheduled for October 31, where analysts expect the company to report earnings per share (EPS) of $1.14 on revenues of $157.2 billion.

These numbers represent increases of 21.3% and 9.8% from year-ago numbers, indicating a growth trend for Amazon.

We'll be keeping a close eye on key metrics such as operating income/margins, earnings per share, revenue, and AWS revenues/operating income, as well as ad revenues and operating margins, to gauge Amazon's performance.

Amazon's earnings report is due on October 31, marking a key date for investors and analysts.

The company is expected to publish its third quarter results on this date.

Analysts are eagerly awaiting Amazon's report to see how the company's financial performance has shaped up.

Amazon's stock took a significant hit after its Q2 earnings report, with shares plummeting 8.8% in a single trading day.

This decline was triggered by the company's lower-than-expected sales for the second quarter, which fell short of analyst projections.

Amazon earned an adjusted $1.26 per share on sales of $148 billion for the June-ended quarter, but analysts had predicted adjusted earnings of $1.03 per share on sales of $148.67 billion.

The tech giant's cloud division, AWS, was a bright spot, exceeding expectations with revenue of $26.3 billion, up 18.7% year over year.

AWS sales growth accelerated in back-to-back quarters for Amazon, a welcome trend for investors who had been fretting about the division's slowing growth rate.

However, investor concerns are shifting to Amazon's retail operations, where year-over-year sales growth slowed from 12% in Q1 to 9% in Q2.

The North America division, which includes all retail sales, advertising, and subscription services revenue in the region, totaled $90 billion in revenue for the quarter.

Amazon's CEO, Andy Jassy, acknowledged the challenges facing the company, stating that customers are trading down on price when they can, and larger purchases like computers and televisions are growing more slowly than expected.