HomeMost PopularInvestingAmazon Earnings: Returning to the Fundamentals

Amazon Earnings: Returning to the Fundamentals

Actionable Trade Ideas

always free

Successful businesses inevitably undergo evolution and change over time. Some completely transform their business model, like Netflix shifting from mailing VHS tapes to becoming a streaming service. Others, like Alphabet and Meta, initially known as a search engine and social media platform, respectively, have diversified their offerings. While Amazon started as an online bookstore and expanded into selling various products and services, it too recognized the need to diversify further beyond its core retail business.

In the recently reported Q3 earnings, Amazonโ€™s reliance on its core business became evident once again. Despite venturing into web and streaming services, the market is now re-embracing the importance of its core operations. The stock surged after beating bottom-line expectations, a result that might have previously led to a sell-off. Although AWS net sales disappointed and Q4 revenue guidance fell slightly short of forecasts, traders are now focused on fundamental business metrics such as margins and revenue growth from the previous quarter. This renewed market acceptance has driven the stock up by more than seven percent in premarket trading.

However, this recent development raises questions about the future implications. Are these better-than-expected results a one-time occurrence, or can they be repeated?

In its pursuit of growth, Amazonโ€™s cloud services, a significant revenue contributor, slightly disappointed in the last quarter due to a delayed entry into the AI market. Investing over a billion dollars in Anthropic, a competitor of OpenAI, last month has provided a competitive advantage. By embracing generative AI and with their Bedrock AI service now operational, Amazon can tap into substantial growth potential. CEO Andrew Jassy believes this opportunity could be worth โ€œtens of billions.โ€ Although this growth will require funding, Amazonโ€™s existing operations are preferable to borrowing, given current interest rates.

See also  Outrageously Successful Quarterly Performers Still UnderratedImagine the financial world as a battlefield, and last week's high-growth stock earnings as the victory cries of Elastic, Okta, and PVH. These gladiators of the market have shown invigorating strength and agility, proving their mettle against expectations and raising their banners high for all to see. Reaffirming their presence, these companies have not only exceeded earnings forecasts but propelled themselves toward monumental gains and prosperity. Let's delve into each of these triumphant warriors and celebrate their victories.Elastic: A Force to be Reckoned withElastic, the cloud analytics company, recently reported its second-quarter results, showcasing a growth so impressive it's practically unmissable. Surging past predictions, Elastic's Q2 earnings of $0.37 per share smashed the Zacks Consensus of $0.24 per share by a staggering 54%. The company has astoundingly surpassed the Zacks EPS Consensus for 20 consecutive quarters, exhibiting an astonishing average earnings surprise of 141% in its last four reports. With Q2 sales of $310.61 million, Elastic's stock has ascended by an incredible 115% this year. Forecasts for explosive growth in 2024 and 2025 further solidify its standing as a powerhouse in the market.Okta: A Formidable ContenderOkta Inc., a key player in enterprise identity solutions, shocked the market with its third-quarter earnings of $0.44 per share, outclassing expectations by 46%. Boasting an average earnings surprise of 30% over the last four quarters, Okta continues to outpace itself. With the stock surging 6% this year, the company's annual earnings are projected to leap from an adjusted loss in FY23 to $1.23 per share in FY24, with an even stronger outlook for FY25. The projected increase in total sales for FY24 and FY25 further enhance the allure of Okta's journey to profitability.PVH: A Veteran with Undeniable FortitudePVH Corporation, a stalwart in branded clothing and accessories, exhibited its enduring strength with Q3 earnings of $2.90 per share, surpassing expectations by 6%. Although sales were slightly below estimates, PVH is anticipated to witness consistent growth in annual earnings and total sales across FY24 and FY25. The company's 48% year-to-date surge, combined with its 9.5X forward earnings multiple, presents an enticing opportunity for investors.A Golden Opportunity for GrowthAt present, Elastic, Okta, and PVH hold a Zacks Rank #2 (Buy), cementing their position as robust assets for investors. The unyielding expansion and resilience showcased by these companies demand attention and recognition from all those seeking growth opportunities in the market. The dominance displayed by these triumphant entities is a clarion call for investors to take notice and consider their potential for colossal gains.Exciting News: Stock Set to Double in Months!

When companies reach the size and complexity of Amazon, investors tend to overanalyze results and focus on the performance of new business sectors. While evaluating these sectors is important, it is equally crucial to remember the solid foundation upon which Amazon was built. The expansion of this foundation in the last quarter is a positive indicator for the companyโ€™s future and its stock, regardless of the performance of other business units during that period.

Overall, Amazonโ€™s reaffirmation of its core business and the potential for future growth in new sectors positions the company well for continued success.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Swing Trading Ideas and Market Commentary

Need some new swing ideas? Get free weekly swing ideas and market commentary from Jonathan Bernstein here: Swing Trading.

Explore More

Weekly In-Depth Market Analysis and Actionable Trade Ideas

Get institutional-level analysis and trade ideas to take your trading to the next level, sign up for free and become apart of the community.