Poor Results Can't Hold Amazon Down; Stock Soars After Q2 Earnings
Amazon.com (NASDAQ: AMZN) released its fiscal second-quarter earnings results after the closing bell on Thursday. The company missed Wall Street EPS and revenue expectations and showed a sharp ramp in spending during the quarter.
It also guided for an operating loss in the third-quarter.
Amazon has shown over and over again that it is willing to forgo near-term profits in order to secure the future of the business. Furthermore, investors have repeatedly shown their faith in this plan, and have continued to push the stock up, causing AMZN to trade at a stratospheric P/E ratio.
The company's valuation is predicated on Amazon eventually becoming a much more efficient company in terms of generating earnings and cash flows. Consider that AMZN shares trade at a trailing P/E of 195, a forward P/E of nearly 88, and a PEG ratio of 5.51, which is extremely rare. For right now, however, investors seem to be riding the momentum in the name and believe that the company's future earnings power will eventually justify today's price tag.
The stock acted very funny after hours on Thursday, and today's rally should not have come as a surprise. Shares immediately plunged on the EPS and revenue miss, but subsequently rallied all the way back to positive. It was clear that investors wanted the stock and were more than happy to use an initial sell-off to enter into long positions.
On Friday, AMZN exploded out of the gates and in afternoon trade, was up roughly 7.50%. The strength in the name, despite the weakness in the company's second-quarter results suggests that this is a stock which could be ready to soar in coming months.
The company reported net income of $7 million or $0.01 per share, from $191 million or $0.41 per share, in the year ago quarter. This missed analysts' consensus EPS estimates of $0.02. The results included a $65 million estimated net loss related to the acquisition and integration of Kiva Systems.
Net sales in the quarter were up 29 percent to $12.83 billion. This compared to $9.91 billion in last year's corresponding quarter. On a constant currency basis, revenues rose 32 percent in the quarter. Wall Street analysts had consensus revenue estimates of $12.89 billion for the second-quarter.
Looking ahead to the third-quarter, Amazon sees net sales between $12.9 billion and $14.3 billion. Operating losses are expected to be between $350 million to $50 million. Currently, analysts have consensus revenue estimates of $14.10 billion for the third-quarter.
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