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Analysis of Inc.

Analysis of Inc.

3 August 2022

Amazon: Betting on cloud services

The Amazon giant probably doesn’t need a special introduction. During the corporate reporting season in the USA, the parameters of Amazon stand out – and clearly deserve attention.

Amazon’s key financial indicators in the second quarter of 2022 are as follows:

  • revenue +7.2% YoY to $121.2 billion with a forecast of $111.8 billion;
  • Amazon Web Services revenue +34% YoY to $19.7 billion, above expectations of $19.4 billion;
  • EPS -$0.2 per share versus $0.12 forecast.

Negative net adjusted profit is bad news for the company, but the efficiency of the AWS cloud division, together with the productive work of e-commerce areas, have shown the ability to generate income even in conditions of rising inflation. Perhaps this is what will now become a key factor for business. 

Strengths of reporting:

  • controlled growth of spending on the execution of orders +14%, at the level of 2021;
  • revenue above expectations;
  • effective share buyback program;
  • the trend towards reducing the number of personnel and excess warehouse space;
  • potential in the direction of advertising sales.

The company can make an effective bet on the development of cloud services and their maintenance capacities. 

There are practically no risks – the business has gone through the entire category of problematic issues and worked out each of them. The global risk is now the same for everyone – the recession in the US economy and its consequences.

The consensus estimate for Amazon shares suggests growth to $160-162 in the near quarter and $180 in the year ahead. 

The daily trading chart of Amazon shares shows that the MACD indicator is growing in a positive area and strengthens the buy signal. The Stochastic oscillator is also growing in the positive zone and confirms the buy signal.

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    ARAVANA Capital management
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