Reports Q3 2020 results on Thursday, October 29, after the close
Revenue Expectation: $ 92.63 Billion
EPS Forecast: $ 7.38
Investors in the e-commerce powerhouse Amazon.com Inc (NASDAQ 🙂 today have every reason to be excited. The company's sales are on the rise as the global COVID-19 pandemic continues to flare up, forcing people to stay at home and make more and more online purchases.
That strength will be seen when the Seattle-based company reports its third-quarter earnings. The release is likely to show sales growth of 32% compared to the same period a year ago.
Expectations of explosive growth have led to a massive increase in Amazon's stock, which is up 73% this year. The stock closed at $ 3,286.33 yesterday, 2.47% higher than a day ago.
Amazon 1-Year Chart.
One of Amazon's strongest points: its paid membership program. This program is the largest in the world, with over 150 million paid members.
In exchange for an annual fee, Prime Membership offers free, expedited shipping on a variety of items. Members also benefit from streaming movies, TV shows and music as well as member-only deals.
Over time, the program has helped entice customers who had once used Amazon only for books and movies.
Investors are confident that the consumer habits caused by the coronavirus will continue, creating more opportunities for Amazon. The ecommerce juggernaut has added more than $ 700 billion to its market value since its low in March, or about the size of Facebook (NASDAQ :). Its market capitalization is now over $ 1.6 trillion.
Cloud Strength
While Amazon's online marketplaces generate the most revenue, they are not the most profitable segment. Amazon is also the world's largest cloud infrastructure provider, with Amazon Web Services (AWS) generating most of the profits.
Because AWS is a high-margin company, it offers Amazon money to expand its business strategies, including aggressive promotions and low-cost hardware devices.
The unit posted 29% growth, up 33% in sales in the first quarter and is likely to show another strong performance as companies shift their data to Amazon servers.
But in addition to these very favorable growing conditions, Amazon's costs are also increasing. As the pandemic rages on, Amazon is spending billions of dollars on security, hiring employees, increasing wages, improving delivery times, conducting medical tests for employees, and stabilizing its supply chain.
However, rising costs should not incur the company's long-term investors. Founder and CEO Jeff Bezos has a good track record of producing results by investing in new data centers and warehouses to expand his e-commerce capacity.
These bets have paid off in the past, enhancing the company's broad competitive advantage in e-commerce.
New Growth Ventures
In addition to the tight margins that sell goods online, Bezos is investing in new high-margin expansion arenas, including digital advertising, which are up three digits.
Backed by these extraordinarily profitable units, Amazon has been able to disrupt a range of industries that will continue to do so for a long time to come.
Other Growth Ventures: The Amazon Studios division is starting to challenge Netflix (NASDAQ 🙂 and HBO (NYSE 🙂 with its original movies and television shows. Amazon also has a foothold in the physical world, after acquiring grocery supplier Whole Foods Market in 2017, the company is building a fleet of convenience stores with no cashiers.
Amazon's hardware unit also confirms the company's competitive advantage as it produces smart speakers and video streaming gadgets.
Bottom Line
Given Amazon's robust business, all 36 major analysts now have a buy rating on Amazon, according to TipRanks.com. Bernstein – the last major holding-rated investment firm – improved stocks in September, citing the recent pullout as an opportunity to extend the stock after missing its comeback since March.
Any temporary setback can be seen as an opportunity for long-term investors to buy Amazon stock.
