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Black Friday hopes have seen retail monster Amazon.com stock rally back since $AMZN reported lower than expected third quarter earnings, beating on revenue but missing on EPS. The company has laid the platform for an aggressive Black Friday and Cyber Monday push.

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CEO Jeff Bezos Adding To His 'World's Richest Man Stats

Black Friday falls on the first day after Thanksgiving and gains its name from the day most retail stores actually show a profit, or get in the black for the year. Obviously not an issue for the e-commerce giant which has AWS printing money everyday of the year. However the retail divisions does face the ame challanges as most retailers and stiff competition for the consumer dollar.

Amazon is focused on Cyber Monday with the Black Friday weekend as an intro for the following Monday.

AMZN has been revealing the full list of deals in all categories ahead of time. This is the start of the blockbuster sales and promotions as the retail industry is gearing up for the holidays. Analysts are touting the company's stock is likely to rise sharply into the beginning of 2020 as investors predict the holiday season sales to be positive for Amazon.

With the stockmarket in a full blown mania hitting new highs daily, greed blinds from risk, so be wary. There is the matter of still digesting Jeff Bezo's $18 billion dollar stock sale last quarter.

Amazon has been investing in its business during this year giving it a solid base ahead. The company has invested heavily in the holiday season. There is however the reality of strapped consumers and a retail industry still hampered by weak performances during the third quarter. Just in the past week we saw weak sales, disappointing earnings and guidance cut by Kohl’s (NYSE: KSS), Home Depot (NYSE: HD), and Macy’s (NYSE: M).

Amazon however is taking much of these firm's businesses and all three business segments witnessed double-digit sales growth in the third quarter. For Amazon the bottom line could be impacted by the investments in the price discounts as shipping and pricing investments could increase. The company has already predicted a weak operating profit for the fourth quarter, so that is built in. Watch for opprtunities and both sides of the market as a trader in the most hyped retail period of the year, that is until Christmas sales kick in.

 

Amazon.com Inc. (NASDAQ: $AMZN) Q3 Earnings Recap

$4.23 Missed $4.62 EPS Forecast and $70.0 Beat $68.8 Billion Forecast in Revenue 

Earnings

Amazon.com Inc. (NASDAQ: AMZN) reported third-quarter results after the close on Thursday. EPS came in at $4.23 vs. $4.62, according to analysts surveyed by Refinitiv.

Revenue came in at $70 billion vs. $68.8 billion, according to analysts surveyed by Refinitiv. AWS $9 billion vs. $9.1 billion, according to analysts surveyed by FactSet

 

Amazon.com Inc NASDAQ: AMZN

Market  Reaction: After hours 1,663.00 -117.78 (-6.61%)

Earnings Highlights

  • Amazon spent over $800 million in the second quarter to expand its free one-day delivery program to more products and regions, and is expected to continue investing in the program for the foreseeable future.
  • It also pointed to increased spending on the growing cloud business and bolstering its advertising sales force.
  • Amazon gave fourth-quarter revenue guidance in the range of $80.0 billion and $86.5 billion, far below the street’s average estimate of $87.4 billion, indicating the all-important holiday shopping season may be underwhelming.
  • The return to a heavy investment cycle is cutting into Amazon’s profitability.
  • Its operating income dropped to $3.2 billion, down 15% from the year-ago period’s $3.7 billion.
  • Amazon’s cloud business, meanwhile, had $9 billion in quarterly sales, falling slightly below analyst expectations of $9.1 billion.
  • AWS operating income totaled $2.26 billion, up 9% from the year-ago period but below the $2.55 billion FactSet consensus estimate.
  • For the past four years, AWS has provided the bulk of Amazon’s operating income.

Amazon Q3 2019 earnings

In a prepared statement, Amazon CEO Jeff Bezos highlighted the company’s free one-day delivery initiative, saying it’s leading to higher customer satisfaction. “Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year. It’s a big investment, and it’s the right long-term decision for customers,” Bezos said.

  • Third quarter results include sales from Prime Day, which the company called its biggest shopping event in history. Amazon previously said Prime Day sales surpassed those of Black Friday and Cyber Monday combined, with more than 175 million items sold over the 48-hour event.
  • Investors will look for additional commentary around the regulatory environment, as politicians from both sides of the aisle have recently called for heavier scrutiny of the company’s business practices.

 

Outlook

 

  • For the fourth quarter, Amazon is forecasting operating income to fall between $1.2 billion and $2.9 billion, also below the $4.2 billion street estimate.

 

What Analysts Will Be Watching

Prime Membership

Earlier in October Amazon Prime Day set another sales record during the two-day sales promotion,

e-Commerce Expansion

Investors will want to hear Amazon's  e-commerce expansion into retail markets like apparel and grocery, in particular Wholefoods.

Which new addressable markets is Amazon attacking, across grocery, pharmaceuticals, gaming and others?

Amazon Web Sevices (AWS)

The biggie is cloud behemoth Amazon Web Services (AWS) cloud. Microsoft and SAP both reported robust Cloud numbers. The big question is that from AWS or new customers?


AWS architecture

In cloud-computing infrastructure, Amazon has a substantial market share lead over Microsoft Azure, Google's Cloud platform and IBM, as well as other players like Alibaba and Oracle. While AWS has maintained growth above 40 percent, Microsoft and Google are currently expanding much faster and picking up share. AWS accounts for around 73 percent of Amazon's operating income in Q1 and continues to grow.

AWS is the envy of Apple, Oracle, Google, IBM and every other niche cloud provider. AWS is the leading platform in this growth market.  Amazon Web Services., Amazon's cloud business in just ten years has become the fifth-largest business software provider in the world.

Amazon has proven that it can diversify beyond e-commerce whilst at the same time Microsoft, Google, IBM and others are all chasing AWS in the cloud.

AWS is almost twice as big as Salesforce

Brick and Mortar Acquisitions and Partnerships

Over the past few years Amazon has been on a buying spree with WholeFoods, talk of Amazon Moving Into Real Estate and last quarter the deal with Sears where Kenmore appliances will be sold through Amazon. Investors will be looking for updates on these and others and a clarification of just what is their strategy going forward. One I would like to hear is about the Whole Foods locations and the $400 billion plus pharmacy market.

There is retail partnerships like this with Kohl’s Corporation $KSS. Amazon will  start selling smart-home products in Kohl’s stores and cater for product returns. With Whole Foods, Sear and now Kohls Amazon is stealthly building brick-and-mortar retail for it's digital base.

 

Source: Amazon.com AlphaStreet

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