The Amazon share price has been on a steady upwards trajectory since the beginning of 2019, and the tech giant has been on a roll in terms of earnings too. With the company’s Q2 results coming out this week, will the good times continue?
A look at the Amazon share price in Q1
The group posted record figures in the first quarter, making it four consecutive quarters of record profits for many traders’ favourite FAANG stock. At the end of April 2019 it was one of the best performing tech stocks of the year so far – the Amazon share price was up 23% since the beginning of the year, and Q1 earnings results beat expectations easily. The increase in revenues and earnings per share was partly put down to Amazon’s rapidly expanding cloud business, Amazon Web Services (AWS).
The rise in the Amazon share price in 2019 has no doubt brought with it a healthy dose of reassurance for shareholders, following the rough patch between September and December 2018 when the stock dropped 27%.
The rise of Amazon Web Services
Amazon Web Services (AWS), the cloud computing branch of the business, seems to be going from strength to strength and has helped to boost EPS, revenue and the Amazon share price over the past year. This is likely to carry through to Amazon’s Q2 results, which are scheduled to be released on Thursday 25 July after market close.
The success of AWS can be put down to its robust services portfolio, which is clearly valued by its existing customers. At the same time, the expanding customer base is fuelling further growth, making AWS a core division of the overall business. The fact that AWS is able to produce higher margins than the retail business for Amazon just adds to its growing importance within the company. In the last quarter, AWS revenue accounted for 13% of Amazon’s net sales.
What could Amazon’s Q2 results look like?
Looking ahead to the second-quarter figures, the company is predicting that revenue will be between $59.5bn and $63.5bn, versus the $52.89bn in the same period last year. The tech giant is also predicting second-quarter operating profit to come in between $2.6bn and $3.6bn, which would be large drop off from the $4.4bn registered in Q1.
In the same period last year, Amazon blew away profit expectations, posting profits of $5.07c, well above the $2.48c that was expected, with a lot of the gains being driven by the company’s cloud services division. As a result, the Amazon share price traded higher after the bell, despite revenues coming in slightly lighter than expected.
Faster Amazon Prime shipping
Another factor affecting Q2 numbers may be the cuts Amazon is making to delivery times for Prime members. The Amazon Prime service already offers two-day delivery, but the group wants to cut that in half to offer one-day deliveries. While one-day and same-day shipping has been available in the past for Prime customers, it’s been limited to orders over $35. The new one-day service will be available to all Prime customers regardless of the price of the order.
The firm expects to take an $800m hit in the second quarter in relation to these changes to the delivery times. The cost is likely to a be one-off, and given how much disruption Amazon has caused in the retail sector, this move is likely to cause even more of a shock, which could ultimately put the tech leader in a stronger position, helping the Amazon share price and it’s prospects further.
The Amazon share price has been broadly pushing higher throughout 2019, and a break above the $2,050 area might put $2,100 on the radar.
Read our Amazon share price Q2 results round-up.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material,
we do not seek to take advantage of the material prior to its dissemination.
CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.