Tech giant, Amazon.com Inc. (Ticker Symbol: AMZNWealth Strength IndexAAPL is Extremely Up and trending Up), reported earnings after the closing bell on Thursday that were less than analysts were expecting. The Seattle, Washington based company reported an earnings per share miss of $4.23 vs. Wall Street analysts’ estimates of $4.62 per share. Amazon reported a slight revenue beat of $70 billion vs. Wall Street analysts’ expectations of $68.8 billion. However, Amazon’s Web Services unit posted lower than expected revenue bringing in $9 billion in revenues vs. $9.1 billion that Wall Street was looking for.
Amazon’s solid revenue report was primarily due to the fact that the company has been heavily investing in its free one-day shipping which has been leading to more purchases from consumers. The company has spent more than $800 million in the past two quarters on improving its one-day delivery service and increasing its reach to more areas across the country. Amazon also will be increasing its spending on improving its cloud business and advertising sales force. Additionally, Amazon stated that it expects to spend an additional $1.5 billion with plans on increasing its warehouse footprint and product selection.
The American multinational technology company updated its future guidance for investors. Amazon is now forecasting its operating income to come in a range between $1.2 billion and $2.9 billion which was below Wall Street analysts’ estimates of $4.2 billion. The company decreased its revenue forecast for the upcoming quarter and is now looking for revenue to be between $80 billion and $86.5 billion vs. Wall Street analysts’ estimates of $87.4 billion. Amazon could possibly be looking for a weaker than expected holiday shopping season with its decreased guidance.
The above image is a shorter-term chart of Amazon’s stock over the past 12 months. Amazon started the year off in 2019 to a good start and then was stuck in a trading channel between the prices of roughly $1,600.00 and $1,725.00. The stock broke out from that range in the second quarter to the upside and traded higher for two months before finding resistance around the $1,965.00 level. After its second-quarter earnings release, Amazon pulled back finding support just below its 100 and 200-day moving averages. The stock then proceeded to rally trading to just .75% away from its all-time high of $2,050.50 on September 4th, 2018. The stock has since pulled back to more realistic valuations and has been trading in a range between roughly $1,850.00 and $1,700.00. Currently, the stock is positive for the year and trading below both its 100 and 200-day moving averages.
(Chart above courtesy of www.tipranks.com)
Based on a survey from 34 analysts offering 12-month price targets, the average price target for Amazon’s stock is $2,201.84. According to that number, the stock is priced at a large discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $1,736.29.
Amazon is making a strong move into the one-day delivery market and it seems like institutional investors are getting behind the investment. It will enable Amazon to further grow its consumer e-commerce business while creating more distance between itself and its competitors.
Investors in the e-commerce space should look to growing e-business competitor Wal-Mart’s (Ticker Symbol: WMT) next earnings release on November 14th for fresh news within the sector.