Case Study on Amazon (AMZN) with Nobias technology
Amazon (AMZN) reported its second quarter earnings after the market’s closing bell on Thursday of last week and that quarterly report sent the stock soaring on Friday. Amazon shares rallied by 10.46% during Friday’s trading session, leading the Nasdaq higher on the day. When Amazon reported results, it beat analyst estimates on both the top and bottom lines. Furthermore, the company provided Q3 guidance, which put investors at ease.
After Friday’s double digit rally, AMZN shares are still down 20.8% on a year-to-date basis. However, looking at the opinions expressed by the credible authors and analysts that the Nobias algorithm tracks, it appears that both cohorts see further upside ahead. Right now, 55% of recent reports published on AMZN stock by the credible authors that Nobias tracks (only those with 4 and 5-star ratings) have expressed a “Bullish” bias on shares.
Looking at the credible Wall Street analysts that Nobias follows (once again, only those with 4 and 5-star Nobias ratings), 100% of them (15/15) believe that AMZN shares are going to rise in value. Zach Bristow, a Nobias 5-star rated author, published a post-earnings report, highlighting both the strengths and weaknesses of Amazon’s second quarter results.
AMZN Aug 2022
Bristow wrote, “The key standout for Amazon for the period was its $121 billion in quarterly revenue. In what appears to have been good news for the Amazon share price, this beat analysts’ expectations by more than $2.04 billion.” He continued, “Advertising revenue was particularly strong this quarter, growing 18% year on year to around $8.8 billion.”
Bristow did put a spotlight on Amazon’s profit-related struggles, however. He said, “These results actually overshadowed a net loss of $2 billion for the quarter. The result gives a loss on earnings per share (EPS) of 20 cents, below analyst estimates of a positive 12 cents EPS.”
During its second quarter report, Amazon stated, “Operating cash flow decreased 40% to $35.6 billion for the trailing twelve months, compared with $59.3 billion for the trailing twelve months ended June 30, 2021.” The company also said, “Free cash flow decreased to an outflow of $23.5 billion for the trailing twelve months, compared with an inflow of $12.1 billion for the trailing twelve months ended June 30, 2021.”
Yet, with regard to these quarterly losses, Bristow stated, “the bottom-line result appeared to be skewed somewhat, as it reflects an approximate $4 billion charge related to Amazon’s equity stake in electric automaker, Rivian Automotive.”
And, looking at management commentary, Bristow notes that these near-term losses appear to be one-time items, which is likely why the market overlooked them and sent shares roaring higher in their aftermath. He quoted Amazon’s CEO, Andy Jassy, who spoke about his company’s operations during the quarterly results and conference call.
Jassy said: “Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network.
We’re also seeing revenue accelerate as we continue to make Prime even better for members, both investing in faster shipping speeds, and adding unique benefits such as free delivery from Grubhub for a year, exclusive access to NFL Thursday Night Football games starting September 15, and releasing the highly anticipated series The Lord of the Rings: The Rings of Power on September 2.”
Bristow continued, “The strong result saw management reinstate third-quarter guidance of net sales between $125 billion and $130 billion, calling for growth of 13-17%.” Looking at forward bottom-line projections, Bristow stated, “Amazon also forecasts operating income of $3.5 billion at the upper end.”
Adria Cimino, a Nobias 4-star rated author, published a bullish report on Amazon after the company’s Q2 earnings were released titled, “Bear Market Blues? Buy Amazon Now”. Cimino noted that Amazon’s retail business struggled during Q2; however, she remains very bullish on the prospects of the company’s cloud operations. She wrote, “If we look at AWS, the cloud computing business, the picture looks even brighter.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
The difficult economic environment hasn't hurt AWS. In fact, this business reported a 36% gain in operating income and a 33% increase in net sales. AWS is the global leader in the cloud computing market. It holds a 33% share, according to Synergy Research Group.”
Cimino continued, “Amazon CFO Brian Olsavsky said during the earnings call that the adoption of cloud services still is in the early stages. This means AWS can drive much more growth at Amazon in the years to come.” She concluded her report stating, “Amazon's track record shows it has delivered gains over the long term. It looks like the company can do that again. And that's exactly why this is a stock you'll want to snap up during the bear market.”
Since AMZN’s Q2 results were published, several analysts with high credibility scores have increased their price targets for AMZN shares. Justin Post of Bank of America, who is a Nobias 5-star rated analyst, maintained his “Buy” rating on shares and increased his price target from $168.00 to $170.00.
Scott Devitt of Stifel, who is a Nobias 4-star rated analyst, maintained his “Buy” rating on AMZN shares and increased his price target from $185.00 to $200.00. And, Nicholas James of JMP Securities, a Nobias 4-star rated analyst, kept his “outperform” rating on shares, raising AMZN’s price target from $172.50 to $180.00.
Disclosure: Nicholas Ward is long AMZN. Nicholas Ward wrote this article for Nobias at their request with a view of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.