Amazon.com, Inc. AMZN shares traded higher by 11.5% on Friday after the company reported impressive second-quarter numbers in a difficult macroeconomic climate.
On Thursday, Amazon reported a second-quarter adjusted EPS loss of 20 cents, missing analyst estimates of a 14-cent profit. Second-quarter revenue was $121.2 billion, beating Wall Street expectations of $119.3 billion. Revenue was up 7% from a year ago.
Amazon said its surprise $2 billion net loss included a $3.9 billion non-operating expense related to its stake in electric truck maker Rivian Automotive Inc RIVN.
Amazon reported $19.7 billion in Amazon Web Services revenue, beating analyst estimates of $19.56 billion.
Looking ahead, Amazon guided for third-quarter revenue growth of between 13% and 17%.
Growth Acceleration Story: Bank of America analyst Justin Post said Amazon 'remains our top '22 FANG stock' given it is one of the few growth acceleration stories in the internet group in 2022.
"Reduced headcount (100k fewer q/q employees), alleviating supply chain issues, accelerating third-party revenue growth to 13%, AWS strength (growth in-line with our 33% est) were bright spots, with 3P revenue growth beating Street by 5pts (and limiting potential retail gross margin headwinds)," Post wrote.
Morgan Stanley analyst Brian Nowak said Amazon has eased fears about AWS deceleration, retail sales growth and profitability.
"This should give investors more confidence in '23 EBIT, even with more AWS investment (which is bullish AWS/retail)," Nowak wrote.
Rosenblatt Securities analyst Barton Crockett said the quarter was far from perfect for Amazon.
"Sales in Amazon's cloud segment rose 33%, a deceleration from 37% in 1Q22, and slower than Microsoft Azure's 46% constant currency growth and the +40% we estimate for the comparable cloud computing portion of Google's cloud segment," Crockett wrote.
Improving Margins: Raymond James analyst Aaron Kessler said Amazon's margin outlook is improving heading into the second half of 2022.
"Importantly, Amazon is gaining back fulfillment efficiencies as it right sizes its staffing (employee count down ~100K q/q) which drove improved operating margins for 2Q and Amazon expects continued improvements in fulfillment efficiencies and fixed cost leverage in 2H," Kessler wrote.
Needham analyst Laura Martin said Amazon shares have hidden value for investors.
"We calculate AMZN's Media Assets value at $514B plus AWS at $663B, implying investors are paying about $50B (0.2x) for $252B of 2022 AMZN's eCommerce revs," Martin wrote.
Telsey Advisory Group analyst Joseph Feldman said Amazon's focus on new business segments, such as grocery, pharmacy and fashion, will continue to create value over time.
"We expect Amazon to continue to gain market share by leveraging its sticky customer base (200MM+ global Prime members) and small business relationships," Feldman wrote.
Ratings And Price Targets:
- Bank of America has a Buy rating and a $170 target.
- Morgan Stanley has an Overweight rating and a $175 target.
- Rosenblatt Securities has a Neutral rating and a $118 target.
- Raymond James has an Outperform rating and a $164 target.
- Needham has a Buy rating and a $175 target.
- Telsey Advisory Group has an Outperform rating and a $150 target.
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