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Bull of the Day: Amazon (AMZN)

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Headquartered in Seattle, WA, Amazon.com, Inc. (AMZN - Free Report) is one of the largest online retailers in the world, with extensive operations in North America, and strong expansion across the globe.

The company, founded by Jeff Bezos in July 1994, went public in May 1997. It currently operates through the following segments: North America, International, and Amazon Web Services (AWS).

Exceptionally Strong Q2 Results

The retail behemoth’s Q2 2018 earnings trounced street expectations, thanks to strong growth in its cloud and advertising businesses.  

Net income surged to $2.5 billion or $5.07 per share, from $197 million, or $0.40 per share, in second quarter 2017. Earnings were significantly ahead of the Zacks Consensus Estimate of $2.49 per share

Net sales increased 39% to $52.9 billion from $38.0 billion in second quarter 2017. Sales however missed our estimate of $53.4 billion.

AWS revenues soared 48.9% year over year to $6.11 billion, thanks mainly to expanding customer base.

Prime Membership Exceeds 100 Million

The company held its fourth annual Prime Day on July 16. This was their biggest global shopping event ever.  Members purchased more than 100 million products, and the best-selling items worldwide were the Fire TV Stick with Alexa Voice Remote and Echo Dot.

Earlier in April, the company had announced that it has more than 100 million Amazon Prime members globally. This was for the first time the company announced the number of Prime members.

Prime members enjoy free, unlimited two-day shipping, access to free music, movies and videos, and other perks. The membership fee was increased to $119 per year, recently.

Prime members now also get free two-hour delivery for Whole Foods orders over $35 in a number of cities, and 10% discounts on sale items at Whole Foods.

The company recently launched Prime Wardrobe, a “try before you buy” shopping service for its in-house as well as many designer brands.

Prime members tend to spend more on Amazon. Per Consumer Intelligence Research Partners, Prime members in the US spend $1,300 a year, while non-Prime members spend about $700.

Soaring Estimates

After an exceptionally strong quarterly report, analysts have significantly raised their estimates for the company.

Zacks Consensus Estimates for the current and the next fiscal year have jumped to $17.27 per share and $25.87 per share respectively, from $12.44 per share and $20.30 per share, before the results.  The company has beaten Zacks Consensus Estimate in each of the past four quarters, with an average quarterly surprise exceeding 1347%.

Amazon.com, Inc. Price, Consensus and EPS Surprise

Amazon.com, Inc. Price, Consensus and EPS Surprise | Amazon.com, Inc. Quote

On Track to $1 Trillion Valuation?

Last week, Apple (AAPL) became the first U.S. company to reach $1 trillion market capitalization. Amazon is now the world’s second most valuable company, with a market capitalization exceeding $900 billion.  Amazon’s shares have in fact risen fasten than Apple’s this year; they are up more than 55% year to date. The company is expected to join the $1 trillion stock club soon.

Bottom Line

Amazon was well known for not caring for short-term profits and instead focusing on longer-term investments. It invested heavily in multiple platforms and has now started reaping the benefits of all those investments made over the years.

This was Amazon’s most profitable quarter even though the company still continues to invest heavily.

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Disclosure: I own shares of AMZN in my personal trading portfolio.




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