Amazon (NASDAQ:) reported second-quarter earnings that surpassed analyst expectations, but its stock fell 12% on Friday due to weaker-than-anticipated guidance for the third quarter and soft consumer trends.
The e-commerce and cloud computing giant posted adjusted earnings per share of $1.26 for the quarter ended June 30, 2024, beating the analyst estimate of $1.03.
Revenue came in at $148.0 billion, slightly below the consensus estimate of $148.68 billion but up 10% YoY from $134.4 billion in the same quarter last year.
Amazon’s third-quarter revenue guidance of $154-158.5 billion also fell short of analyst expectations of $158.2 billion, contributing to the stock’s decline.
In addition, online sales and third-party seller performance missed consensus projections by 0.3% and 1.2%, respectively. Management noted that although volume remained strong, lower average selling prices (ASPs) offset gains as consumers turned to cheaper items and spent less on high-priced discretionary items.
Amazon Web Services (AWS) reported sales of $26.3 billion for Q2, up 19% YoY, while the North America segment saw a 9% increase to $90.0 billion. The International segment grew 7% to $31.7 billion, or 10% excluding foreign exchange impacts.
Operating income more than doubled to $14.7 billion from $7.7 billion in the second quarter of 2023.
Analysts comment on Amazon stock after Q2 report
Bernstein: “The challenge Amazon’s stock faces here is not the business itself, but rather the lofty expectations in forward estimates — $70B in 2024 OI and $85-90B next year! Possible, of course, but would require an incredible streak of perfection in a steady operating environment for two straight years… nothing in Internet remains unchanged for that long. We’ll save you from reading the details, though we write for you, and simply state that OI estimates will almost certainly come down in the morning, the stock will go with it, and this should create an optimal buying opportunity of Amazon’s stock. Why? Well we see Amazon as a bit of a coiled spring into the second half of 2024. And we like Amazon to build on that momentum through 2025.”
Bank of America: “Retail revenues in 2Q missed expectations and stock was down 7% after-hours on likely upside expectation reset (despite AWS beat). However, we remain constructive on the two key stock drivers: 1) improving AWS trends & 2) retail margin growth still intact into holidays. Amazon remains our top large-cap stock given AWS acceleration and AI opportunity, though we lower our sum of parts PO to $210 (from $220) given slightly lower growth estimates & comp multiples.”
Piper Sandler: “For Top Pick AMZN, 2Q was a mixed quarter. On the positive, AWS is solidly in re-acceleration mode with growth at 19% and exceeding the Street outlook. However, retail revenue was light and the guide weak for 3Q revenue and profit. We still think retail margins are improving, but wish we didn’t have the distraction of the science experiments. We move on from the quarter and reiterate OW; target price to $215 from $220.
Morgan Stanley: “AMZN retail profits missed due to weaker consumer trends and lower seller fees (apparel/logistics), creating tactical uncertainty around the slope of the cost to serve improvements in Retail EBIT we have previously detailed. AWS acceleration stronger than expected.”
BMO Capital Markets: “Two key Cloud trends converge simultaneously for AWS: 1) re-acceleration in IT budgets and 2) meaningful AI workloads. As such, AWS is well-positioned for a multi-year value creation cycle, with elevated upfront CAPEX spend. Separately, Core NA retail margins increased Q/Q in 2Q24, as greater optionality increases frequency. The slightly higher-than-expected 3Q24E OpEx positions Amazon well for an effective 4Q Holiday. Reiterate Outperform, Top Pick, and $230 Target Price.”
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