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Amazon’s Q2 2024: Revenue Miss and 9% Price Drop – Time to Invest?
Verde Finance & Lorenzo Vinueza
August 03, 2024
Amazon: The everything store. Seriously, they sell everything from cloud services to cat food. Founded by a certain book-loving billionaire in 1994, this Seattle-based behemoth has grown from a tiny online bookstore to a global empire. With an army of over 1.5 million employees, they’ve mastered the art of online retail, cloud computing, and streaming.
Amazon’s been on a rocket ship, with sales skyrocketing from a measly $100 billion to a whopping $469 billion in just six years. Their cloud business, AWS, is the golden goose, attracting big-name clients and boosting their stock price. But can this party last forever? Will their tech wizardry continue to wow investors and customers? Only time (and their next big idea) will tell.
Amazon's Q2 earnings call was a tale of two clouds: a bright one for AWS and a storm cloud for retail. AWS, their crown jewel, kept cruising at an impressive 39% year-over-year growth. Investors cheered as it continued to rake in the big bucks.
But on the retail side, things were a bit damp. Sales fell short of expectations by -3%, a sign that even bargain-hunting consumers are feeling the pinch of inflation. This unexpected sprinkle of bad news sent shivers down Wall Street's spine, causing the stock price to plummet by 9.8%.
So, is the retail giant facing a retail rainout? Not necessarily. But this earnings call served as a wake-up call, reminding everyone that even Amazon isn't invincible to economic storms. The question remains: can they weather the storm and emerge stronger, or will the rain continue to dampen their sales growth? Only time will tell.
Let’s dive deeper into the recent financial report of Amazon. where we provide a comprehensive recap of the major events that shaped the financial landscape of Amazon. We will delve into a thorough financial analysis, valuation metrics, and an outlook snapshot to give you a holistic understanding of the recent earnings report of Vertex.
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Summary of Earnings Report
Revenue: Amazon dazzled with a whopping $148 billion in revenue, marking a solid 10% year-over-year growth. Although it fell just shy of the $149 billion forecast, it’s still a testament to their robust market presence.
Earnings Per Share (EPS): The EPS soared to $1.26, comfortably beating the expected $1.03. This impressive performance underscores Amazon’s ability to generate substantial profits.
Operating Income: Amazon’s operating income skyrocketed to $14.7 billion, nearly doubling from $7.7 billion in Q2 2023. This remarkable increase highlights their operational efficiency and strategic prowess.
Net Income: The net income surged to $13.5 billion, or $1.26 per diluted share, a significant leap from $6.7 billion, or $0.65 per diluted share, in the same quarter last year. This dramatic rise showcases Amazon’s profitability and financial health.
AWS Performance: Amazon Web Services (AWS) continued to shine, with sales climbing 19% year-over-year to reach $26.3 billion. AWS remains a cornerstone of Amazon’s growth strategy, driving innovation and revenue.
Amazon’s CEO, Andy Jassy, emphasized the company’s advancements in AI and cloud infrastructure, which are pivotal to their future growth and market leadership.
The Financial Statement Section of the Verde website offers clear and precise details regarding the stock's various financial statements, complemented by visualizations that illustrate ongoing trends. Moreover, this section presents positive and negative highlights of the company's overall performance, both on an annual and quarterly basis.
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Amazon’s Valuation and Recent Price Drop
Market Capitalization: Amazon’s market cap is approximately $1.5 trillion.
Price-to-Earnings (P/E) Ratio: The P/E ratio stands at around 60, indicating strong investor confidence in Amazon’s future earnings potential.
Enterprise Value-to-EBITDA (EV/EBITDA): The EV/EBITDA ratio is 12.8x, which is below its 10-year average of 17x. This suggests room for multiple expansions, especially with improving retail margins and AWS growth.
Recent Price Drop
Amazon’s stock experienced a nearly 7% drop, falling to around $172 per share. This decline was primarily driven by two factors:
Revenue Miss: Amazon reported $148 billion in revenue for Q2 2024, slightly below the expected $149 billion. This minor miss on revenue expectations contributed to investor concerns.
Weak Guidance: The company’s guidance for the upcoming quarter was perceived as weak, adding to the negative sentiment and leading to the stock’s decline.
Despite these short-term challenges, Amazon’s fundamentals remain strong, with significant growth in AWS and strategic investments in AI and cloud infrastructure.
The website's section on Amazon includes comprehensive information on the company's valuation numbers, such as current and target price, financial ratios, and graphical comparisons with the market, as well as key valuation, market, and enterprise cap multiples presented with descriptive highlights and visual representations.
Future Outlook
Earnings Momentum: Anticipated earnings per share of $15.30 and the positive trend in earnings estimate revisions suggest Amazon is poised for continued financial strength.
Revenue Growth: With expected revenues of $125 billion, a 7.9% increase from the previous year, the company seems well-positioned for top-line growth.
Market Volatility: It's important to consider the potential impact of market volatility and broader economic factors on Amazon's stock performance.
Competition: Competing with major industry players like Microsoft and Google, Amazon will need to maintain its competitive edge to secure market share and continue its growth trajectory.
Verde offers proactive financial forecasts, including revenue, EPS, and net income projections. Our growth analysis provides a balanced view of potential opportunities and risks for each stock
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