Artemis Investment Limited - The e-commerce and cloud powerhouse is still a contentious investment

The stock price of Inc. (AMZN) fell 13% in after-hours trade on Thursday, Oct. 27, following the company's third-quarter results announcement.
ADMIRALTY, Hong Kong - March 10, 2023 - PRLog -- Its sales increased 15% year on year (and 19% in constant currency terms) to $127.1 billion, although it fell short of analyst's expectations by $370 million. Its net income dropped 9% to $2.9 billion, or $0.28 per share, but it still beat the average estimate by seven cents.

AMZN's earnings weren't bad, but are they worth purchasing in this tough market for technology stocks? Let's look at what the bears and bulls noticed in AMZN's recent report.

Bears will take note that AMZN anticipates fourth-quarter sales to climb only 2% to 8% year on year. The midpoint of the prediction suggests that sales will increase by 8% for the entire year, compared to 22% growth in 2021.

CFO Brian Olsavsky blamed the slowdown on "continued implications of broad-scale inflation, heightened gasoline prices, and rising energy costs" on consumer spending, as well as "enhanced foreign currency headwinds" from a strong dollar during the conference call.

The bears will also remind investors that AMZN often subsidizes the expansion of its lower-margin e-commerce sector with higher-margin cloud income from Amazon Web Services (AWS). However, AWS's revenue growth has slowed in the last year, and its operating margins have shrunk.

Many corporations are reducing their expenditure on large cloud arrangements due to macroeconomic difficulties. Currency headwinds, which lowered AWS's reported revenue growth by a percentage point in the third quarter, are expected to worsen as the U.S. dollar strengthens.

The bulls will argue that AMZN's earnings appear much better in constant currency terms. It anticipates currency headwinds to lower its full-year sales by 460 basis points, implying that its top line would expand by 7% to 13% year over year in Q4 in constant currency term.

Currency challenges are also limiting its overseas revenues, which fell 5% year on year to $27.7 billion in Q3 on a reported basis. However, in constant currency terms, its overseas sales increased by 12%. Its North American revenues climbed 20% year on year to $78.8 billion, indicating that its core U.S. market remained strong.

The bulls think AMZN's company will stabilize after the macroeconomic challenges have passed. That may be true, but I believe the bears will maintain control until that occurs – and AMZN is still too expensive to be deemed a bargain investment in this challenging market.

To find out more, you may also visit us at Artemis Investment Limited through our website

Cherry Hwuang
Marketing Director

Cherry Hwuang
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