Putting up a forum post so we can chat about AMZN earnings tomorrow AH. Been discussion on which direction we think it’ll head based around some big current ER moves from others recently. A few items brought up from TF I’ve included below but please add as I think there’s an interesting bear case myself but want to get everything out there as it’ll also have a big impact on SPY going into Friday which a lot of us like to play.
Facts below are quick so may not be exact, I’ll add more to this in a bit.
Current P/E - 58.9
Earnings Whisper $4.40 versus estimate $3.88
(seems quite low compared to all quarters of 2021)
Seems like supply chain issues and post-covid are hurting Facebook and wondering if guidance won’t be impacted as well. Wondering if we see a correction closer to pre-covid dump levels of closer to $2,000 per share?
if you don’t have a large account you have no business playing amzn earnings. if you are buying puts/calls several hundred dollars out of the money you are just handing your money to MMs
Right… This EPS is literally comparable to mid 2018 level, which ridiculous (stock @ 1500’s). Either they severely under-guided or this signals obscenely overpriced if they just meet it. I could see it rally the market if it returns to teens EPS.
I also just looked at options liquidity and there’s not much volume or OI, if anything wondering if a bigger move on Amazon might make for a spy play at close tomorrow and flipping it Friday at open?
One way to play this also is to bet on the guidance AMZN gives as it pertains to ECOM. If they give good guidance on the strength of ECOM I could see it boosting SHOP and BIGC if only for the first hour of trading and vice versa if it gives poor guidance. Like FB their earnings has the ability to affect alot of other stocks and the market as a whole.
that seems unlikely, their cash cow is AWS. It’s their highest margin business and the pandemic generated a lot of cloud business as WFH took off, but i don’t think you can count on that continuing as the pandemic slowly fades and business adjust to having people back in the office or hybrid. If you look at MSFT’s cloud earning as a proxy, those came inline with analyst estimates which was a deceleration from previous quarters. Combine that with their historically loss leading ecom and then add in inflationary supply chain costs that aren’t going away, i think it’s completely reasonable to think their EPS will impacted moving forward.
Q3 results show that non-AWS actually lost money from its operations and AWS carried AMZN with nearly 4.9b in income. It looks like non-AWS sales went down 3.5B but the expenses remained similar. As well, listening to the call, it looks like AMZN incurred a lot of covid related expenses amongst others.
AWS sits at 32% in Q3 2021, and has been sitting there since at least 4 yrs ago.
It would be amazing if AMZN can grow the marketshare and sustain the 30% profit margin, but I have trouble believing that given the competition out there.
A little bit of warning though: It looks like I painted a bearish picture on AMZN, but last time I painted bullish pic on NFLX based on financials and it did a 180 as I completely missed the market sentiment and valuation metrics. So I would appreciate it if others can weigh in on that part.
if there is bull case for this, it’s that we’re on the cusp of covid recovery and entire server infra market is growing 37% yoy continually. i can see e commerce returning to profitability to about a third of op income if not half. How market will react tomorrow is still very hard to predict as it literally just brushed aside earnings numbers last quarter. one thing for sure is that market will eventually have to correct and show true price discovery; when that will happen is impossible to tell.
but market barely responded (3470->3300, 4.9% drop) and recovered in couple days.
How market will react tomorrow is still very hard to predict as it literally just brushed aside earnings numbers last quarter. one thing for sure is that market will eventually have to correct and show true price discovery; when that will happen is impossible to tell.
I suspect the big difference between AMZN last earnings results market response and this one in terms if similar results come out would be the fact that the fed was still operating under “transitory” inflation. The market environment as since shifted.
I agree and it seems the market is using this round of ER to correct some of these inflated PE’s of some of the growth companies. If I remember right most of fhe ER from last quarter the market didn’t respond too either, things seem much different this quarter and the market is over correcting for a time, I think this one may see a big drop if there isn’t great guidance but we know all the headwinds they’re facing. An big EPS beat is the only way I think this will be green into tomorrow.
Azure is a decent competitor to AWS. Here is some info from 2021 Q4 earnings from Microsoft.
Might indicate that they haven’t lost much ground in comparison to AWS, although that is just an assumption.
It does fall in line with what you said about the market share of cloud infrastructure services being stable.
https://www.microsoft.com/en-us/Investor/earnings/FY-2021-Q4/press-release-webcast
Revenue in Intelligent Cloud was $17.4 billion and increased 30% (up 26% in constant currency), with the following business highlights:
· Server products and cloud services revenue increased 34% (up 29% in constant currency) driven by Azure revenue growth of 51% (up 45% in constant currency)
Although, intelligent cloud isn’t just Azure.
“The Intelligent Cloud segment contains several products other than Azure, including SQL Server, Windows Server, Visual Studio, System Center, consulting services and support.”
I’ve been in on a 2700/2690 put spread, have about $3,000 riding. I think this (was) a good risk/reward play, as the put premiums were EXTREMELY low for an ER week up until Tuesday. It may be a bit late to get into cheap puts now, as they have quadrupled since the Tuesday lows. But if someone is looking for a cheap lotto, a bad miss could see AMZN down to $2,500.
do not forget the clout that MSFT has with government agencies. We have a large contract with the US Army and we are forced to use azure because of it.
How much growth potential is there for Amazon in cloud based on pretty flat market share over the last few years and some big players in the space, is there that much to gain where short term the market is going to let it sustain this high PE?
This was briefly mentioned, but I think we need to pay attention to freight costs which have risen quite a bit YoY:
Considering China manufactures probably at least 75% of all retail goods, Amazon and other 3rd party sellers that use the platform are going to see sales shrink as costs increase dramatically and they need to raise prices to compensate. Many sellers are probably using up their stock they have from the height of COVID, but many companies will need to start factoring the cost of freight.
There is also no incentives for shipping companies to solve this problem, they are making record profits with this supply chain issue and have very good incentives to never solve this problem. Given this is the case, I could see guidance for their retail sector to factor in slower growth than expected.
