Amazon (NASDAQ:) reported second-quarter earnings that beat analysts’ expectations, but its stock fell 12% on Friday on weaker-than-expected third-quarter guidance and weak consumer trends.
The e-commerce and cloud computing giant reported adjusted earnings per share of $1.26 for the quarter ended June 30, 2024, beating analysts’ estimates of $1.03.
Revenue came in at $148.0 billion, slightly below the consensus estimate of $148.68 billion but up 10% year over year from $134.4 billion in the same quarter last year.
Amazon’s third-quarter revenue forecast of $154 billion to $158.5 billion also fell short of analysts’ expectations of $158.2 billion, which helped drag the stock lower.
Additionally, online sales and third-party seller performance fell short of expectations by 0.3% and 1.2%, respectively. Management noted that while sales volume remained strong, lower average selling prices offset gains as consumers turned to cheaper goods and spent less on high-priced discretionary items.
Amazon Web Services (AWS) reported second-quarter sales of $26.3 billion, up 19% year over year, with North America up 9% to $90.0 billion. International grew 7% to $31.7 billion, or 10% excluding foreign exchange impacts.
Operating income more than doubled to $14.7 billion, compared to $7.7 billion in the second quarter of 2023.
Analysts Comment on Amazon Stock After Q2 Report
Bernstein“The challenge for Amazon stock here is not the business itself, but the high expectations in the future estimates – $70 billion in OI 2024 and $85-90 billion next year! It is possible, of course, but it requires an incredible series of perfection in a stable operating environment for two consecutive years… Nothing on the Internet remains unchanged for long. We will save you reading the details, although we are writing to you, and simply mention that OI estimates will definitely drop in the morning, and the stock will go with it, and this should create an ideal buying opportunity for Amazon stock. Why? Well, we see Amazon as a kind of twisted spring in the second half of 2024. We hope that Amazon will build on this momentum through 2025.”
American bank“Retail revenue in Q2 missed expectations and the stock fell 7% after hours on the potential for a bullish reset (despite AWS outperformance). However, we remain positive on the stock’s two main drivers: 1) AWS’s improving trends and 2) retail margin growth remaining healthy through the holidays. Amazon remains our largest large-cap stock given AWS acceleration and AI opportunity, though we have reduced the total buyout price to $210 (from $220) given slightly lower growth estimates and comparable multiples.”
Piper Sandler“For AMZN, Q2 was mixed. On the positive side, AWS is firmly in acceleration mode again with 19% growth and beating Street expectations. However, retail revenue was soft and the evidence for Q3 revenue and earnings is weak. We continue to believe retail margins are improving, but hope to avoid the distraction of scientific trials. We move into the quarter and reiterate OW; target price to $215 from $220.
Morgan Stanley“AMZN’s retail earnings missed targets due to weak consumer trends and lower seller fees (apparel/logistics), creating tactical uncertainty around the slope of the cost-of-service improvements in retail EBITDA that we previously mentioned. AWS acceleration is stronger than expected.”
Capital Markets at Bank of Montreal“Two major cloud trends are converging at the same time for AWS: 1) re-accelerating IT budgets and 2) meaningful AI workloads. As such, AWS is well positioned for a multi-year value creation cycle, with upfront capital spending increasing. Separately, North American core retail margins rose QoQ in 2Q24, as larger options increase frequency. Slightly higher-than-expected 3Q24 opex puts Amazon in a good position for an effective Q4 holiday. Repeat Outperform, #1 Pick, $230 price target.”