by SignalFactory · February 3, 2022 | 13:33:51 UTC
Amazon.com Inc. (NASDAQ: AMZN) is struggling to maintain the rapid profit and revenue growth it enjoyed in FY 2020. In the company’s most recently reported quarter, earnings sank for the first time in six quarters as revenue growth slowed significantly. The initial boost from people shopping online while sheltering at home during the pandemic has begun to wear off. On top of that, the company must increasingly deal with rising wages and labor shortages.
Investors will be looking to see if Amazon can reverse its earnings decline and revive its revenue growth when the company reports earnings on Feb. 3, 2022, for Q4 FY 2021.3 Analysts expect earnings per share (EPS) to decline for the second straight quarter as revenue rises at its slowest quarterly pace in at least four years.
Investors will also be focusing on revenue generated by Amazon Web Services (AWS), the company’s high-margin cloud computing business. AWS still comprises a relatively small share of the company’s overall revenue, but it generates the majority of Amazon’s operating income. Analysts are expecting AWS revenue to rise, but at a slower pace than in the two previous quarters.
Shares of Amazon have lagged the broader market over the past year. The stock’s performance gap with the market has gradually widened throughout the last year, but it especially began to broaden around mid-December 2021. After hitting a recent peak in the middle of that month, the stock began to shed recent gains. Those losses accelerated around mid-January but the stock has begun to rebound over the past week in advance of its Q4 earnings report. Amazon’s shares have provided a total return of -9.5%, well below the S&P 500’s total return of 20.5%.
Analysts expect Amazon’s financial performance to continue weakening in Q4 FY 2021. EPS is expected to plummet 73.2% compared to the year-ago quarter, its fastest decline out of any quarter in at least the past four years. Revenue is expected to grow 9.7% YOY, its slowest pace out of any quarter in at least the past four years. For full-year FY 2021, analysts forecast EPS to fall 2.9%, which would be the first annual decline in at least seven years. Annual revenue is expected to rise 21.8%, which would be the slowest pace since FY 2019.
As mentioned above, investors will also focus on revenue generated by AWS, Amazon’s cloud-computing platform. AWS offers developers a range of on-demand technology services, such as compute, storage, database, analytics, machine learning, and other services.
These services are primarily used by start-ups, enterprises, government agencies, and academic institutions. The company’s AWS business generates much higher margins than its e-commerce business. In FY 2020, Amazon’s global retail sales- and subscription-based business segments generated about 88% of the company’s total revenue while AWS accounted for a mere 12%. However, AWS accounted for 59% of total operating income for the year, making it Amazon’s main profit generator.
Amazon Short (Sell) Enter at: 2788.84 T.P_1: 2629.07 T.P_2: 2435.33 T.P_3: 2278.67 T.P_4: 2191.30 T.P_5: 2065.59 S.L: 3090.95
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