What is the Defining Factor in Amazon's Earnings Reports?

What is the Defining Factor in Amazon's Earnings Reports?   Amazon.com Inc (AMZN) has seen rapidly increasing sales and profits in its e-commerce and cloud service businesses during the COVID-19 outbreak that started last year. The sharp increase in online shopping has greatly strengthened Amazon's giant e-commerce business. Companies and employees forced to work from home increased the demand for cloud services. The company continued to grow even as it battled massive antitrust charges from European Union regulators. Investors will take a closer look at the company's fourth quarter 2020 earnings reports, which will be released after the February 2, 2021 market close, in order to see how it affects Amazon's financial condition. Analysts predict that revenue will grow much faster (compared to the same period last year) from the 4th quarter of 2019. Earnings per share (EPS) is expected to accelerate from a year ago, but the pace is expected to be slower than in the 2nd and 3rd quarters. Investors will soon be tracking the revenue of Amazon Web Services (AWS), which handles the company's cloud operations. AWS is the leading service of the cloud computing industry, which has grown rapidly in recent years and accelerated its acceleration due to work from home during the epidemic. Analysts expect AWS revenue to record strong growth, albeit slightly slower than in the same period last year.

Shares of Amazon continues to grow as COVID-19 pandemic spreads to the US and global economy

Amazon stocks did not show the wider market declines during the epidemic collapse that began in February and March. Although Amazon shares have been trading flat for the past five months, it is observed that it has recovered rapidly. However, Amazon shares generated a total return of 76.2 percent, nearly five times the S&P 500's total return of 15.7 percent as of January 27, 2021. The company's earnings per share (EPS) performance is a little more mixed. Amazon has reported insufficient EPS since the first quarter of 2019. However, the company recorded rapid growth of 192 percent in the third quarter of 2020. Although Amazon's earnings exceeded expectations in the third quarter of 2020, stocks fell the next day, then started to rise and move horizontally. There is a consensus forecast of a 12.1 percent improvement for Q4 2020. It is modest compared to the conspicuous quarters in recent years, but still represents a faster growth rate compared to 7.1 percent in Q4 2019. In contrast, Amazon's quarterly revenues have steadily grown at a strong pace in recent years.

The first three quarters of Fiscal Year 2020 are of course not an exception

Quarterly earnings reported 30 percent year-over-year gains during fiscal years 2017 and 2018. However, the rate of growth slowed significantly in the 2019 fiscal year. Analysts predict that revenue growth in the fourth quarter of 2020 will be 36.9 percent on an annual basis. This means that the growth rate of 20.8 percent announced in the 4th quarter of 2019 will almost double. Investors will also focus on revenue generated by Amazon's cloud computing platform AWS. AWS is a segment that provides computing, storage, database and other services to start-ups, companies, governments, and academic organizations in a global context. AWS represented just 12.5 percent of Amazon's total revenue in fiscal 2019. Still, AWS accounted for about two-thirds of the company's consolidated operating revenue for that period, as it had a significantly higher profit margin than the company's ecommerce business.

While revenue growth on Amazon's AWS has been healthy, this growth has slowed relatively in recent years.

The first three quarters of the fiscal year 2020 represent the smallest year-over-year increases in the past two years. Analysts expect revenue to increase 28.1 percent in the fourth quarter of 2020 compared to the same period the previous year. Amazon's total AWS sales of $ 12.8 billion for Q4 will be more than double the sales for Q2 2018. However, this will also be at least 14 quarters of AWS revenue growth.   What is the Defining Factor in Amazon's Earnings Reports? Source: