Amazon.com, Inc. AMZN shares were up 5% on Friday after the company reported earnings and revenue beats and said online grocery delivery tripled in the second quarter.
Amazon reported second-quarter EPS of $10.30 on revenue of $88.9 billion. Both numbers blew away analyst expectations of $1.46 and $81.5 billion, respectively. AWS cloud revenue was up 29%.
Looking ahead to the third quarter, Amazon guided for between 24% and 33% revenue growth and between $2 billion and $5 billion in net income. Amazon also moved its Prime Day sales event to the fourth quarter.
Profitability Potential: Bank of America analyst Justin Post said Amazon’s second-quarter margins provide investors with a glimpse at just how profitable the company’s business model can be.
“We continue to like Amazon’s 2H setup with a strong holiday ahead, driven by changing retail habits (plus Prime Day in 4Q),” Post said.
UBS analyst Eric Sheridan said Amazon is well-positioned for the medium and long-term in several different promising investment themes.
“Looking behind the current dynamic driven by ‘shelter in place,’ we still see Amazon being the beneficiary of drivers with long-tailed multi-year adoption curves (eCommerce, cloud computing, media consumption, digital ad & AI voice assistants),” Sheridan wrote.
Needham analyst Laura Martin said management’s commentary that it cut back on marketing in the second quarter to try to manage demand was particularly bullish.
“We remain focused on Services hidden value where profits were 5x higher than ecommerce profits in 2Q20, driven by 44% y/y advertising growth at 50% profit margins, we believe,” Martin wrote.
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Gaining Market Share: Raymond James analyst Aaron Kessler said accelerating revenue growth and increased leverage are driving better-than-expected operating income for Amazon.
“Our 2020/2021 revenue estimates increase by 7%/6%, while our GAAP operating income estimates increase by 57%/24%,” Kessler wrote.
KeyBanc analyst Edward Yruma said Amazon continues to take market share bites out of its retail competitors.
“Put differently, the $16.8B y/y increase in N. American sales is comparable to a top 25 retailer’s sales on an annual basis,” Yruma wrote.
Loup Ventures' Andrew Murphy said COVID-19 is giving Amazon’s business a major boost.
“The way that we shop, work, and play is changing quickly. Amazon is a clear beneficiary of many of the changes brought on by COVID-19,” Murphy wrote.
AMZN Ratings And Price Targets:
- Bank of America has a Buy rating and $3,560 target.
- UBS has a Buy rating and $4,000 target.
- Needham has a Buy rating and $3,700 target.
- Raymond James has an Outperform rating and $3,500 target.
- KeyBanc has an Overweight rating and $3,500 target.
Amazon's stock traded around $3,202 per share at the time of publication.
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