AMZN
☁️ Amazon Web Services (AWS) remains the primary profit driver, growing 19% last quarter, although slightly lagging Google Cloud’s growth rate.
📢 Advertising and subscriptions are significant contributors with strong growth (20% and 11% respectively) and high margins, mitigating e-commerce concerns.
📉 While tariffs impact the e-commerce segment (only 7% growth), it represents roughly a third of profits; the overall valuation looks appealing at ~20x expected earnings in 2.5 years due to operational leverage in both AWS and e-commerce.
@Artedeinvertir:
“Amazon has also corrected significantly in the stock market, almost 25%. And in Amazon, this graph is very important, very interesting, regarding all the profit Amazon generates, not sales, because the majority of sales are from e-commerce. E-commerce is greatly affected by tariffs, as a large part of what is sold on Amazon comes from China, which is where the biggest problems with tariffs are. But you have to look at companies in terms of profit. Sales are important, but not as much as profit. Of Amazon’s profit, the operating profit here in red, we can see that AWS in the last quarter was 10 billion, and what it labels as ‘Other’ includes e-commerce, advertising, Amazon Prime. Perhaps e-commerce is 5 billion per quarter; it’s practically maybe a third of Amazon’s profit, although it’s what the company is known for. But here you can see it also has a large part from subscriptions and advertising, which have extremely high profit margins. So, even if a third of the company’s business is marginally reduced if they cannot pass on the entire price increase from tariffs to the customer, well, it’s not the end of the world for Amazon. Amazon will continue to grow with AWS. In fact, the last quarter it grew 19%. It’s less than Google’s, which means Google is gaining market share from the market leader, AWS. That indicates the product is at least on par or superior, but at least competitive. But Amazon will also do well, and there’s a lot of investment in data centers and the cloud, not just related to AI. The advertising part is growing at 20% annually, subscriptions at 11%. E-commerce, being a larger business where it has a lot of market share, grows only 7%. So, tariffs and all this news affect it, but it’s not the end of Amazon. The profit forecasts are very strong because this year it’s expected to earn $6 per share, and this is expected to increase due to that operational leverage effect, which it has in both business lines, AWS and e-commerce. That, combined with growth, is why the market is very bullish on these cloud companies, because growth of 20% in sales might lead to profit growth of 40% this year. And then there’s the e-commerce part, where the same happens. Amazon has already built much of the base, so even if sales increase slightly, that 7-8%, profits should improve. So, in 2.5 years, the market expectation is that it will earn $9 per share. That would leave Amazon shares now trading at 20 times earnings, which is one of the lowest valuations it has had in the last 5 years.”
Watch the exact part of the video where @Artedeinvertir talks about Amazon here:
Watch the video on YouTube
Read more articles analyzing Amazon (AMZN) at the following link. AMZN stock.
