E-Commerce Titans Wrapped 2020 With A Bang

The end of January is reserved for learning how tech and e-commerce companies did during the holiday season. More precisely, all FAAMG stock, namely Alphabet Inc GOOGGOOGL, Apple Inc AAPL, Facebook, Inc. FB, Amazon.com, Inc. AMZN, and Microsoft Corporation MSFT, have now shown just how much they crushed the holiday season.

Amazon's Blockbuster Quarter

Amazon has beaten the revenue expectations for the past consequent seven quarters, pushed by COVID-19 driven e-commerce and cloud business. The previous two quarters had the most impressive realization in revenues compared to the expectations and this time around, Amazon delivered its largest quarter by revenue of all time, generating $125.56 billion in sales. Since the amount of US online purchases grew 32% to $188 billion during this record-breaking holiday season, no wonder Amazon had its first $100 billion quarter, with revenue increasing 44% from last year's quarter. Outside of its core business, the cloud-computing segment fell slightly short of Wall Street's expectations of $12.83 billion but did increase 28% from last year's quarter $9.95 billion to $12.7 billion.

Refinitiv analysts expected $7.23 earnings per share which would be a moderate increase of 11% compared to the previous year. Amazon delivered $14.09 while it had higher costs than usual as it also paid a one-time $300 bonus to front line employees in November.

In Q1 of 2021, COVID-19-related costs are expected to drop to about $2 due to lower volumes. Revenue for Q1 2021 is expected to be in the range between $100 billion and $106 billion, although less than the holiday blockbuster quarter, still greater 33% and 40% from a year earlier with profit in the range profit of between $3 billion and $6.5 billion.

As for the whole year, sales surged 38% to $386.1 whereas profit roughly doubled to $21.3 billion compared to 2019.

Jack Ma's Friction With Beijing Cast A Shadow Over Alibaba's Strong Results And Surge In Sales

Alibaba Group Holding Ltd's BABA core business, e-commerce, also benefited from the COVID-19 driven trend to do more shopping online from the comfort of our own homes. Also on Tuesday, Alibaba has beaten the expectations and reported an increase of 37% in revenues in the quarter ended in December, compared to a year earlier. However, its strong results have been overshadowed by the Chinese government which is taking a more conservative approach towards entrepreneurs who own large tech businesses. Jack Ma, Alibaba's co-founder, has been negatively affected by this approach and some analysts and experts are concerned this friction could hamper Alibaba's growth as they did pull the plug on Ant Group's IPO two days before it was supposed to take place. These factors cloud also undermine the investor's confidence in Amazon and other tech companies. The government fears that big private tech companies have too much influence and power on the financial industry and other sensitive segments.

Latest Developments

Alibaba's long-term investors might see the governmental pressure as nothing else but noise as Jack Ma China is leading a company that is on top of China's technological capabilities and well-positioned to benefit from digitalization of consumption, along with growing spending power. As for Jeff Bezos, Amazon's founder and the man who fundamentally changed how we buy stuff, he will be stepping down from his CEO role in the Q3 of 2021 to focus more on strategy as the executive chairman of the company. This transition should be a smooth one, since Bezos' right-hand Andy Jassy, who joined Amazon in 1997 and now serves as CEO of Amazon Web Services, will be taking the helm as the new CEO.

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