- Amazon’s mixed second quarter earnings results led to a more than 7% decline in the stock on Friday.
- The company reported $113 billion in revenue, missing analyst estimates by about $2 billion.
- Here’s how 3 Wall Street analysts reacted to Amazon’s second quarter earnings report.
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Friday’s decline represented Amazon’s worst day since the onset of the COVID-19 pandemic in March of 2020, but Wall Street analysts remain bullish on the company’s long-term growth prospects.
Amazon reported second-quarter revenue of $113.1 billion and earnings per share of $15.12, missing analyst estimates of $115.1 billion and beating estimates of $12.32, respectively.
The company said it expects revenue of $106 billion to $112 billion in the third quarter, which would represent year-over-year growth of 10% to 16%. Still, that’s well below analyst estimates of $118.7 billion in third-quarter revenue. Amazon gave a wide third quarter guidance range for profits, guiding for $2.5 billion to $6.0 billion in operating income.
As investors navigate Amazon’s results, here’s how three Wall Street analysts reacted to the second quarter earnings report.
Stifel: “Rinse, lather, buy the dip.”
“While Amazon missed overall topline numbers, the shortfall was primarily concentrated in Online Stores which includes first party sales (the lowest multiple business line). The higher margin AWS, advertising, subscription and 3P business lines outperformed our expectations, with AWS growth accelerating sequentially,” Stifel said in a note on Thursday.
The firm said the current sell-off makes for an attractive setup “now that shares are on the other side of the COVID comp reset,” according to the note.
Stifel reiterated its Buy rating and $4,400 price target, and advised investors to take advantage of the 7% sell-off.
JPMorgan: “AWS & Advertising were bright spots in an otherwise tough quarter.”
“While street estimates will come down, Amazon is still running at a 2-year compound annual growth rate of 25% to 30%, which is above its pre-pandemic growth rate of ~20%,” JPMorgan said in a note on Thursday.
The bank noted that the weaker-than-expected earnings results were driven by higher labor costs, less operating leverage on slower volume growth, and marketing costs returning to more normalized levels.
“Amazon is still catching up with strong multi-year demand and 2021 is shaping up to be another big fulfillment build-out period on the heels of 50% square footage growth in 2020. Slower growth and increased investments make the shares more challenging near-term, but we expect revenue growth to normalize more around 20% next year and Amazon’s investments in fulfillment and logistics bode well for future growth,” JPMorgan said.
JPMorgan reiterated its Overweight rating and lowered its price target to $4,100 from $4,600.
Bank of America: “Reopening pressuring sales, but just a blip in long-term penetration trend.”
“While outlook was disappointing, and bears could argue Amazon is investing in 1-day fulfillment out of competitive necessity, we think Amazon remains in a solid position, with US retail growth likely above industry growth rates (indicating continued share gains). We still think the stock set up could benefit after 4Q guidance is provided (potentially removing an overhang), when Street can likely start looking forward to more normal growth comps in 2022,” BofA said.
Bank of America reiterated its Buy rating and lowered its price target to $4,250 from $4,300.