As mentioned in our previous analysis, Hedge Funds are becoming more selective as the quarter progresses. While many were initially short due to a perceived earnings miss in Q4 EBIT, some have reversed their positions as any potential downside is expected to be short-lived. Investors are embracing a “buy-the-dip” mentality, recognizing the fluctuating nature of operating income and viewing Amazon as the best capital allocator in the industry, preferring investment over immediate profit gains. The bullish outlook for Amazon revolves around:
- Anticipated growth in gross merchandise value and market share, driven by enhanced service levels and ongoing regionalization efforts in the US and globally;
- Continued margin expansion in Amazon’s ecommerce segment due to improving unit economics;
- The emergence of a new high-margin revenue stream from Prime Video with advertisements, expected to become a significant contributor over time.
Investors are particularly interested in the company’s investment strategy, with AWS slated for growth next year, consistent performance in ecommerce, and anticipated returns from other ventures in the future. Key focus areas include:
- Updates on AWS growth and optimization;
- Indications of retail margin improvement based on management’s “cost to serve” commentary;
- Progress in fulfillment regionalization and cost containment efforts;
- Insights into fiscal year capex for ecommerce and ongoing AWS investments;
- Feedback on the adoption of Prime Video with ads and industry trends;
- Strategic positioning regarding GenAI investments.
The target growth rate for AWS is 21%, and achieving this in 3Q24 implies a significant revenue increase of $1.62 billion, surpassing previous levels and highlighting strong performance.
Turning to the latest quarterly results:
- Earnings per share came in at $1.43, exceeding expectations of $1.16;
- Net sales reached $158.88 billion, up 11% year-over-year and surpassing estimates;
- Amazon Web Services reported net sales of $27.45 billion, a 19% increase from the previous year, slightly below estimates.
Operating results showed:
- Strong AWS operating profit, beating estimates;
- Improved operating margins in North America and internationally;
- Overall operating income of $17.41 billion, representing a 56% year-over-year growth.
Looking ahead, Amazon projects robust profit and revenue for the current quarter, exceeding analyst expectations and reflecting optimism for a successful holiday shopping season.
Following the positive results and guidance, Amazon’s stock price surged, demonstrating investor confidence in the company’s performance.
Loading…