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Amazon (AMZN) Q1 Earnings Miss Estimates, Revenues Up Y/Y
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Amazon.com (AMZN - Free Report) reported first-quarter 2020 earnings of $5.01 per share, missing the Zacks Consensus Estimate by 21.2%. The bottom line also declined 29.3% from the year-ago quarter.
Net sales of $75.45 billion comfortably surpassed the Zacks Consensus Estimate of $74.36 billion and exceeded management’s guided range of $69 billion to $73 billion. Further, the figure improved 26.4% on a year-over-year basis.
The coronavirus pandemic remained a concern as it put a stop on the sale of non-essential items and luxury commodities during the reported quarter. Further, the crisis scenario led to increased expenses. Notably, Amazon spent more than $600 million in order to combat coronavirus-induced disruptions in the first quarter.
Nevertheless, the stay-at-home situation resulted in a steep rise in the consumer demand for groceries, healthcare goods and other essential items, which contributed to the quarter under review.
North America revenues (61% of sales) improved 28.8% from the year-ago quarter to $46.1 billion. International revenues (25% of sales) climbed 18% year over year to $19.1 billion. Amazon Web Services (AWS) revenues (14% of sales) surged 32.8% year over year to $10.2 billion.
The top line was primarily driven by solid customer demand, strong Amazon Web Services (AWS) momentum, expanding smart devices portfolio and strengthening content portfolio on Prime Video.
Moreover, solid momentum across third-party sellers remained a major positive during this pandemic situation. Also, expanding grocery delivery and pick-up services at Whole Foods stores were tailwinds.
Coming to price performance, Amazon has returned 33.9% on a year-to-date basis, outperforming the industry’s rally of 15.8%.
However, uncertainties and economic disruption owing to rapidly spreading COVID-19 continues to remain a major headwind.
Notably, the share price of the company has plunged 5.2% in the pre-market trading. This can be attributed to its accelerating COVID-19 related expenses that might result in operating loss in second-quarter 2020.
Amazon plans to spend $4 billion in a bid to protect its workforce, delivery vans and customers from COVID-19 infection while addressing the rising customer demand, in the ongoing quarter.
Nevertheless, Amazon’s strong global presence remains a major positive. Additionally, growing Prime and AWS momentum, strengthening Alexa skills and expanding smart devices portfolio are likely to drive the company’s business in the near term.
Prime Momentum
Amazon Prime momentum continued to benefit the company during the reported quarter on the back of robust grocery services, customer-oriented benefits, international footprints and expanding original content despite coronavirus-induced disruptions.
The company expanded delivery capacity by 60%. Further, it expanded its grocery pick-up services from 80 Whole Foods stores to 150 of them.
Further, the company opened its first cashierless grocery store namely Amazon Go Grocery in Seattle during the reported quarter.
The company also launched Prime in Netherlands in the first quarter, which expanded its international presence. Prime service in the country offers free shipping, Prime Video, Twitch Prime and Amazon Photos. Along with Prime, the company launched Amazon.nl.
Furthermore, Prime Video premiered Making the Cut during the reported quarter. Further, it expanded its regional original content by streaming Love Island in France, Celebrity Hunted in Italy and The Forgotten Army in India during the reported quarter. Also, it streamed docuseries namely The Test: A New Era for Australia’s Team in Australia in the same quarter.
Additionally, Amazon rolled out its premium movie rental service Prime Video Cinema that allows users to stream in-theater movies in the United States, the U.K. and Germany. The service included the titles like Birds of Prey, The Invisible Man, Onward, Emma and Trolls World Tour.
Amazon.com, Inc. Price, Consensus and EPS Surprise
AWS that witnessed significant improvement in the top line, continued to gain momentum across customers during the first quarter courtesy of strengthening services portfolio.
AWS made its new security service namely Amazon Detective generally available to customers. Notably, the service helps customers to analyze, investigate and identify the source of security issues.
Further, expanding availability zones and regions contributed to the results. Currently, AWS has 76 Availability Zones within 24 geographic regions.
Additionally, AWS’ highly efficient and reliable product and services portfolio helped Amazon in gaining traction across several government authorities, health organizations, apex bodies, companies and non-profit organizations during the coronavirus-induced crisis
The World Health Organization (WHO), New York City COVID-19 Rapid Response Coalition, Los Angeles Unified School District, National Health Service of England, Kentucky and West Virginia authorities, Cerner and Volunteer Surge, are some of these customers that utilized AWS solutions to combat the coronavirus.
Further, AWS gained traction across healthcare workers, medical researchers, scientists and educational institutions during this pandemic scenario.
Alexa & Expanding Smart Devices Offering
Amazon continued to enhance the skills and features of Alexa during the reported quarter. Moreover, advancing Alexa features with increasing number of devices compatible with Alexa remains a key positive.
The company made Alexa available on select LG and Samsung Smart TV 2020 models and the new OnePlus 8 mobile phone.
Further, Alexa access is available in BMW vehicles in the United States. It is also available in MINI vehicles in the United States, France, Italy, Spain and Austria.
Apart from Alexa, the company banked on strengthening Fire TV family of products.
Additionally, Amazon unveiled Ring Video Doorbell 3 and Ring Video Doorbell 3 Plus during the reported quarter, which expanded its smart doorbell offering.
Further, the company rolled out its new versions of its Ring Chime and Ring Chime Pro in the United States., the U.K., Canada, Australia and New Zealand.
Quarter Details
Product sales (55.5% of sales) increased 22% year over year to $41.8 billion. Service sales (44.5% of sales) surged 32.2% from the year-ago quarter to $33.6 billion.
Operating expenses were $71.5 billion, up 29.3% from the year-ago quarter. As percentage of revenues, the figure expanded 210 bps on a year-over-year basis to 94.7%.
Cost of sales, fulfillment, technology & content, marketing, and general & administrative increased 30.5%, 34.1%, 17.6%, 31.8% and 23.8% to $44.3 billion, $11.5 billion, $9.3 billion, $4.8 billion and $1.4 billion, respectively, on a year-over-year basis.
Other operating expenses were $70 million during the first quarter compared with $5 million reported in the year-ago quarter.
Operating income decreased 9.7% from the year-ago quarter to $3.9 billion. Further, operating margin contracted 210 bps from the year-ago quarter to 5.3%.
Operating income for AWS came in $3.1 billion, up 38.3% year over year. However, the same for North America declined 42.6% from the prior-year quarter to $1.3 billion.
Further, International segment reported a loss of $398 million, wider than the year-ago quarter’s loss of $90 million.
Balance Sheet & Cash Flow
As of Mar 31, 2020, cash and cash equivalents stood at $27.2 billion compared with $36.1 billion as of Dec 31, 2020. Further, marketable securities totalled $22.1 billion at the end of the first quarter, up from $18.9 billion at the end of the fourth quarter.
Long-term debt was $23.44 billion in the reported quarter compared with $23.41 billion in the previous quarter.
Further, the company generated $3.1 billion of cash from operation in the first quarter, which declined significantly from $19.7 billion in the prior quarter.
Guidance
For second-quarter 2020, Amazon expects net sales between $75 billion and $81 billion. The figure is anticipated to improve in the range of 18-28% on a year-over-year basis. The Zacks Consensus Estimate for net sales is pegged at $78.1 billion.
Management projects an unfavorable foreign exchange impact of approximately 70 bps.
Proceed from operational activities are likely to range from operating loss of $1.5 billion to operating income of $1.5 billion. Notably, the company reported an operating income of $3.1 billion in the year-ago quarter.
This guidance is inclusive of $4 billion costs related to COVID-19.
Long-term earnings growth rate for Wayfair, Sprouts Farmers and Alibaba is currently pegged at 23.04%, 3.7% and 24.6%, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Amazon (AMZN) Q1 Earnings Miss Estimates, Revenues Up Y/Y
Amazon.com (AMZN - Free Report) reported first-quarter 2020 earnings of $5.01 per share, missing the Zacks Consensus Estimate by 21.2%. The bottom line also declined 29.3% from the year-ago quarter.
Net sales of $75.45 billion comfortably surpassed the Zacks Consensus Estimate of $74.36 billion and exceeded management’s guided range of $69 billion to $73 billion. Further, the figure improved 26.4% on a year-over-year basis.
The coronavirus pandemic remained a concern as it put a stop on the sale of non-essential items and luxury commodities during the reported quarter. Further, the crisis scenario led to increased expenses. Notably, Amazon spent more than $600 million in order to combat coronavirus-induced disruptions in the first quarter.
Nevertheless, the stay-at-home situation resulted in a steep rise in the consumer demand for groceries, healthcare goods and other essential items, which contributed to the quarter under review.
North America revenues (61% of sales) improved 28.8% from the year-ago quarter to $46.1 billion. International revenues (25% of sales) climbed 18% year over year to $19.1 billion. Amazon Web Services (AWS) revenues (14% of sales) surged 32.8% year over year to $10.2 billion.
The top line was primarily driven by solid customer demand, strong Amazon Web Services (AWS) momentum, expanding smart devices portfolio and strengthening content portfolio on Prime Video.
Moreover, solid momentum across third-party sellers remained a major positive during this pandemic situation. Also, expanding grocery delivery and pick-up services at Whole Foods stores were tailwinds.
Coming to price performance, Amazon has returned 33.9% on a year-to-date basis, outperforming the industry’s rally of 15.8%.
However, uncertainties and economic disruption owing to rapidly spreading COVID-19 continues to remain a major headwind.
Notably, the share price of the company has plunged 5.2% in the pre-market trading. This can be attributed to its accelerating COVID-19 related expenses that might result in operating loss in second-quarter 2020.
Amazon plans to spend $4 billion in a bid to protect its workforce, delivery vans and customers from COVID-19 infection while addressing the rising customer demand, in the ongoing quarter.
Nevertheless, Amazon’s strong global presence remains a major positive. Additionally, growing Prime and AWS momentum, strengthening Alexa skills and expanding smart devices portfolio are likely to drive the company’s business in the near term.
Prime Momentum
Amazon Prime momentum continued to benefit the company during the reported quarter on the back of robust grocery services, customer-oriented benefits, international footprints and expanding original content despite coronavirus-induced disruptions.
The company expanded delivery capacity by 60%. Further, it expanded its grocery pick-up services from 80 Whole Foods stores to 150 of them.
Further, the company opened its first cashierless grocery store namely Amazon Go Grocery in Seattle during the reported quarter.
The company also launched Prime in Netherlands in the first quarter, which expanded its international presence. Prime service in the country offers free shipping, Prime Video, Twitch Prime and Amazon Photos. Along with Prime, the company launched Amazon.nl.
Furthermore, Prime Video premiered Making the Cut during the reported quarter. Further, it expanded its regional original content by streaming Love Island in France, Celebrity Hunted in Italy and The Forgotten Army in India during the reported quarter. Also, it streamed docuseries namely The Test: A New Era for Australia’s Team in Australia in the same quarter.
Additionally, Amazon rolled out its premium movie rental service Prime Video Cinema that allows users to stream in-theater movies in the United States, the U.K. and Germany. The service included the titles like Birds of Prey, The Invisible Man, Onward, Emma and Trolls World Tour.
Amazon.com, Inc. Price, Consensus and EPS Surprise
Amazon.com, Inc. price-consensus-eps-surprise-chart | Amazon.com, Inc. Quote
Expanding AWS Portfolio: A Key Catalyst
AWS that witnessed significant improvement in the top line, continued to gain momentum across customers during the first quarter courtesy of strengthening services portfolio.
AWS made its new security service namely Amazon Detective generally available to customers. Notably, the service helps customers to analyze, investigate and identify the source of security issues.
Further, expanding availability zones and regions contributed to the results. Currently, AWS has 76 Availability Zones within 24 geographic regions.
Additionally, AWS’ highly efficient and reliable product and services portfolio helped Amazon in gaining traction across several government authorities, health organizations, apex bodies, companies and non-profit organizations during the coronavirus-induced crisis
The World Health Organization (WHO), New York City COVID-19 Rapid Response Coalition, Los Angeles Unified School District, National Health Service of England, Kentucky and West Virginia authorities, Cerner and Volunteer Surge, are some of these customers that utilized AWS solutions to combat the coronavirus.
Further, AWS gained traction across healthcare workers, medical researchers, scientists and educational institutions during this pandemic scenario.
Alexa & Expanding Smart Devices Offering
Amazon continued to enhance the skills and features of Alexa during the reported quarter. Moreover, advancing Alexa features with increasing number of devices compatible with Alexa remains a key positive.
The company made Alexa available on select LG and Samsung Smart TV 2020 models and the new OnePlus 8 mobile phone.
Further, Alexa access is available in BMW vehicles in the United States. It is also available in MINI vehicles in the United States, France, Italy, Spain and Austria.
Apart from Alexa, the company banked on strengthening Fire TV family of products.
Additionally, Amazon unveiled Ring Video Doorbell 3 and Ring Video Doorbell 3 Plus during the reported quarter, which expanded its smart doorbell offering.
Further, the company rolled out its new versions of its Ring Chime and Ring Chime Pro in the United States., the U.K., Canada, Australia and New Zealand.
Quarter Details
Product sales (55.5% of sales) increased 22% year over year to $41.8 billion. Service sales (44.5% of sales) surged 32.2% from the year-ago quarter to $33.6 billion.
Operating expenses were $71.5 billion, up 29.3% from the year-ago quarter. As percentage of revenues, the figure expanded 210 bps on a year-over-year basis to 94.7%.
Cost of sales, fulfillment, technology & content, marketing, and general & administrative increased 30.5%, 34.1%, 17.6%, 31.8% and 23.8% to $44.3 billion, $11.5 billion, $9.3 billion, $4.8 billion and $1.4 billion, respectively, on a year-over-year basis.
Other operating expenses were $70 million during the first quarter compared with $5 million reported in the year-ago quarter.
Operating income decreased 9.7% from the year-ago quarter to $3.9 billion. Further, operating margin contracted 210 bps from the year-ago quarter to 5.3%.
Operating income for AWS came in $3.1 billion, up 38.3% year over year. However, the same for North America declined 42.6% from the prior-year quarter to $1.3 billion.
Further, International segment reported a loss of $398 million, wider than the year-ago quarter’s loss of $90 million.
Balance Sheet & Cash Flow
As of Mar 31, 2020, cash and cash equivalents stood at $27.2 billion compared with $36.1 billion as of Dec 31, 2020. Further, marketable securities totalled $22.1 billion at the end of the first quarter, up from $18.9 billion at the end of the fourth quarter.
Long-term debt was $23.44 billion in the reported quarter compared with $23.41 billion in the previous quarter.
Further, the company generated $3.1 billion of cash from operation in the first quarter, which declined significantly from $19.7 billion in the prior quarter.
Guidance
For second-quarter 2020, Amazon expects net sales between $75 billion and $81 billion. The figure is anticipated to improve in the range of 18-28% on a year-over-year basis. The Zacks Consensus Estimate for net sales is pegged at $78.1 billion.
Management projects an unfavorable foreign exchange impact of approximately 70 bps.
Proceed from operational activities are likely to range from operating loss of $1.5 billion to operating income of $1.5 billion. Notably, the company reported an operating income of $3.1 billion in the year-ago quarter.
This guidance is inclusive of $4 billion costs related to COVID-19.
Zacks Rank & Stocks to Consider
Currently, Amazon carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Retail-Wholesale sector are Wayfair Inc. (W - Free Report) , Sprouts Farmers Market, Inc. (SFM - Free Report) and Alibaba Group Holding Limited (BABA - Free Report) . While Wayfair and Sprouts Farmers sports a Zacks Rank #1 (Strong Buy), Alibaba carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Wayfair, Sprouts Farmers and Alibaba is currently pegged at 23.04%, 3.7% and 24.6%, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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