Market News

Amazon Delivers a Mixed Bag in Q2, Shares Pop 13%

Story Highlights

Amazon’s stock price increased by 13% in extended trading hours after the company delivered mixed second-quarter results and issued rosy guidance for Q3 2022.

Amazon (AMZN) delivered mixed results for the second quarter, which ended on June 30, 2022. The e-commerce giant posted revenue that beat consensus estimates. However, earnings missed the same. Following the Q2 results, AMZN shares rose more than 13% in extended trading hours.

Q2 Earnings Snapshot

Net revenue in the quarter increased 7% to $121.2 billion compared to the year-ago quarter. The figure beat consensus estimates of $119.18 billion. Amazon Web Services’ revenue increased to $19.74 billion from $14.81 billion in the year-ago quarter.

Amazon posted a loss per share of $0.20 compared to earnings per share of $0.76 in the year-ago quarter. The figure missed the expected earnings per share of $0.12. The loss came as the company had to contend with inflationary pressures in the quarter that triggered a rise in costs. The cost of sales increased to $66.42 billion from $64.18 billion in the year-ago quarter. 

Other Key Metrics

Operating income in the quarter declined to $3.3 billion compared to $7.7 billion in the year-ago quarter. Cash, cash equivalents, and restricted cash increased to $36.6 billion from $34.16 billion in the year-ago period. 

Interestingly, Prime Members purchased more than 300 million items during the Prime Day event. It was the biggest Prime Day event for Amazon’s selling partners, going by the purchase of 100,000 items per minute.

Rosy Q3 2022 Guidance

Amazon expects Q3 2022 net sales to be between $125 billion and $130 billion, representing 13% to 17% growth compared to the year-ago quarter. The company also projects a 3.9% unfavorable impact from foreign exchange rates. Operating income is expected to be between $0 and $3.5 billion, compared to $4.9 billion in the year-ago quarter.

Management’s Commentary

Chief Executive Officer (CEO) Andy Jassy said, “We’re also seeing revenue accelerate as we continue to make Prime even better for members, both investing in faster shipping speeds, and adding unique benefits such as free delivery from Grubhub for a year, exclusive access to NFL Thursday Night Football games starting September 15, and releasing the highly anticipated series The Lord of the Rings: The Rings of Power on September 2.”

Wall Street is Bullish on Amazon

The Street is bullish about Amazon stock, with a Strong Buy consensus rating, based on 34 Buys and one Hold. The average Amazon price target of $171.67 implies 40.4% upside potential from current levels.

Website Traffic Shows Mixed Trends

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Amazon’s performance this quarter.

According to the tool, the Amazon website recorded a slight decline of 0.37% in global visits to 836.5 million in June 2022 compared to the previous month of May. However, year-to-date, Amazon website traffic increased by 1.86%, compared to the same period last year.

Learn how Website Traffic can help you research your favorite stocks.

Key Takeaway for Investors

Amazon’s Q2 revenue growth and strong guidance for Q3 2022 are reassuring as they come amid growing inflationary pressures. However, it is the rate of earnings decline that should be a point of concern.

Read the full Disclosure.

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