11:26 Thursday 25 October 2018

Amazon will report their third quarter earning later today and Wall Street has high expectations. Their AWS (Amazon Web Services) and core business operations have both performed exceedingly well year after year and they have consistently produced high revenues.

AWS has provided significant growth for the company in recent times and this trend is likely to continue as they dominate the cloud computing sector with a 34% market share fighting off rivals such as Microsoft and Google. In their previous report, AWS delivered a 79% increase in operating income year on year of $1.64bn and this figure has been touted to rise by as much as a further 44% by analysts.

E-commerce sales, Prime subscriptions and sales of Amazon specific products such as Echo, are all being projected to increase as Amazon appear to tighten their grip on customer loyalty by making purchases easier to make via linked devices and fast delivery options.

Global stocks have seen a rough few weeks recently, and Amazon wasn’t impervious to this trend. In the last five days, AMZN lost over 6% and currently sits at 1664.20 with a market cap of $881bn. While they have dropped significantly since their all-time high of September, they still remain over 40% up on the year.

Amazon sit within the fabled NASDAQ tech portfolio referred to as FAANG stocks (Facebook, Amazon, Apple, Netflix and Google) which has seen wild swings and volatility this year. In terms of YTD performance, Amazon has been 2nd best to Netflix, but has outperformed the NASDAQ by quite some margin when compared together.

 Despite the expected elevation in financial performance in the third quarter review, factors outside of Amazon’s scope may well be reflected in stock valuation. Q3 has been an awkward one for many companies. Factors such as global tensions and over inflated market expectations due to recent gains have overshadowed some reports that we have seen in the past few days making the market somewhat unpredictable.

While there will be no effect on the Q3 report, it is worth noting that Amazon opened its ‘Amazon Go’ store in San Francisco this week. The store currently is aimed at office workers and provides food, drinks and snacks with a ‘Just Walk Out’ policy. Shoppers will need to install the Amazon Go app on their phone to enter the store, and once they do, customers simply pick up what they want and as they exit the store, their Amazon account will be charged. No cashiers, no hassle, no queues. This is the second store Amazon has opened, the first being in Seattle, but plans to expand the brand and the services and products they supply are afoot.

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