It's the earnings season, and many investors are concerned about the IT sector, particularly after Netflix's disappointing results. Should Amazon's shareholders be on the lookout for a similar drop? The answer may be "yes" and "no."
The company's valuation is similar to Netflix's, and since the stock falls on lower-than-expected growth, it will almost certainly lose ground. Maybe. After Netflix's findings, Amazon's subscription services might also show deceleration. Now, hope reposes on Amazon Web Services (AWS) and the company's advertising segment.
Figure 1: What to Watch when it comes to Amazon Stock Q1 earnings
For The New York Times, Dave Sanders
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Freefall is bringing free e-commerce to an end.
The earnings of Amazon's online retailing platform are most likely to derail investors next Thursday. CEO Andy Jassy recently warned that macroeconomic flaws are hampering the company's profitability in the long run.
"At a certain point, you can't keep paying all of the expenses and run a commercial that's economic," Mr. Jassy said in his. speech.
And he does not only refer to US inflation or the war between Russia and Ukraine, but also to China's recent Covid outbreak, which has also restricted tech supply chains.
Investors should expect that Amazon still has some pricing influence to help ensure its profitability reduce. However, given how much the company has invested in its logistics infrastructure, and recent labor disputes, which have led Amazon to increase wage increases, investors may expect gloomy results at the bottom line.
Again, Web Services to the Rescue (Again)
The Seattle behemoth's real cash cow is Amazon's Web Services segment, which should continue to compensate for financial losses. However, here's how long can that last? It has proved to be a complex task. So, demand for these professionals.
AWS' cloud division would require more money to support its own growth, according to reports. AWS, despite its remarkable revenue growth in the past few years, hasn't been able to increase its market share at the same pace.
Bulls should closely watch Microsoft and Alphabet's financial results for this first quarter. They should also examine their projections for the next quarter. AWS is likely to gain some market share or if it is actually losing ground.
An Old New Hope
All eyes will be turned on advertising as well. Google's and Meta's business margins fell by 37% in 2021, higher than AWS' 29%. Both firms, however, depend heavily on advertising.
This area, which is expected to gain market share from Google, might be a good start for many quarters in the future. E-marketer projects Amazon will increase by 3% in two years, compared to a 2.2% loss from the market leader.
Another possibility is Amazon's subscription services. Netflix's first-quarter earnings disclosure left a significant flaw on its streaming crown. So if Prime Video the second largest player in the industry discloses a still growing subscriber user base, Netflix bulls may find themselves flocking to Amazon.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. It may also contain affiliate links. These relationships do not influence editorial content. Thank you for supporting The Amazon Maven)