Amazon.com is an American multinational technology company, that focuses on e-commerce, artificial intelligence, digital streaming and cloud computing. It is a constituent of the well known FAANG acronym, the market's five most popular and best-performing tech stocks, namely Facebook, Apple, Amazon, Netflix and Alphabet's Google.
Q1 Amazon earnings report: sales up 17%
By the end of 2018, many analysts were betting on whether Amazon would be able to earn $59.65 billion in revenue in the first quarter of 2019. However, reality exceeded their expectations.
On 25 April, Amazon (AMZN) announced its earnings for its first fiscal quarter of this year, ending on 31 March 2019, with better than expected results. The US-based tech giant has surpassed everyone’s expectations by achieving rather outstanding results.With an earnings per share of $7.09, instead of the expected $4.72 from financial experts. Common shares outstanding summed with shares underlying stock-based awards totalled 507 million, compared to 504 million in the previous year. The company’s revenue was $59.7 billion and net income was $3.6 billion - a major increase in comparison to revenue of $51 billion and net income of $1.6 billion in the year-on-year comparison.
According to the Amazon earnings report, US sales increased by 17% to $35.8 billion, while international sales grew by 9% to $16.2 billion.
Amazon Web Services (AWS) continued to be the star of the show, growing 41% in sales to $7.7 billion. Skyrocketing Amazon’s profits, AWS remains an unrivalled cloud computing market leader today, ahead of Microsoft Azure and Google Cloud. It accounts for about 13% of Amazon’s total revenue of Q1.
The advertising business is another rapidly growing source of revenue for the company. Included in Amazon's "other" category, it has jumped 34% to bring in $2.7 billion in net sales.
Subscription services, such as Amazon Prime, have also gone up by an impressive 40% to $4.3 billion.
Amazon gave a Q2 revenue prediction in the range of $59.5 billion and $63.5 billion, while analysts are betting on an estimate of $60.88 billion.
Current situation: US tech stocks are dragged lower with antitrust probe worries
After a steady performance in the first quarter, Amazon is facing an unexpected challenge in Q2: the e-commerce company's stock has become volatile due to the antitrust probe worries.
Over the past few days, many news reports have made it clear that Amazon and its tech counterparts will soon be in the spotlight with the "top-to-bottom" antitrust investigation from the Federal Trade Commission (FTC), the US House Judiciary Committee, the Justice Department and Congress.
Ever since it was announced on 1 June that the further investigations will be held by the FTC, the market’s favourite technology stocks saw a major price crash. The FAANG stocks lost around $140 billion in value on Monday, 3 June. The NASDAQ Composite index has shed 1.6% and even the Dow Jones Industrial Average has fallen slightly. The tech shares sell-off came in reaction to the recent news reports.
Both Amazon and Facebook lost nearly $41 billion from their market values, with AMZN shares sliding by more than 4% and FB down over 8%.
It is believed that Google will be the first one to be investigated. Reports over the weekend stated that US regulators have already begun to divide responsibility for the different companies between them. However, it is still not confirmed whether Amazon will actually face scrutiny from antitrust regulators. Nonetheless, the decisions suggest that the FTC is maintaining a closer eye on the growing power of Silicon Valley's tech giants.
Amazon share price forecast: what’s next for AMZN?
Millions of investors are now waiting for the next AMZN report date with bated breath to find out whether the company will be able to exceed their already-high expectations once again.
There is no doubt that these talks around the new regulations will have some sort of an impact on Amazon’s business image. However, will it really affect the company’s share price in the long run, and what does the Amazon share price prediction look like now?
If Amazon were simply the largest US online retailer, it would already be a worthy investment based on its great advertising strategy and volume of sales. However, there are many more reasons for why this company is consistency raising the market standard. Amazon is expanding its operations in many cutting-edge industries, from artificial intelligence to drones to cloud computing. Each of them, in turn, could add substantial value over time.
The US government may be investigating the big-tech pantheon FAANG, but financial analysts insist that investors have little to worry about for the foreseeable future. Based on data gathered by CNN Business, which polled over 40 investment analysts, Amazon has a median stock target of $2,250, with a high estimate of $2,750 and a low estimate of $2,000. From their point of view, Amazon stock predictions look quite positive.
Michael Levine, a senior analyst from Pivotal Research Group, makes his bullish bet on Amazon share price, targeting $2,500, according to Tip Ranks. If his prediction transpires, Amazon, which is currently valued at around $893 billion, could increase all the way up to $1.35 trillion by 2020.
On Tuesday, 4 June, during the afternoon trading session, Amazon shares increased by 1.8%. The Nasdaq Composite regained more than 3% of its value, while the Dow Jones Industrial Average and the S&P 500 index were both up around 1.8%.
At the time of writing, the AMZN share price was trading at $1,722.82.
Image source: Sundry Photography / Shutterstock.com