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Cloud Stocks: Amazon’s Faster Shipping Hurting its Earnings

Posted on Monday, Oct 28th 2019

It was a surprising quarter for Amazon (NASDAQ: AMZN). For the first time in more than two years, the company saw its earnings fall. The market was clearly not impressed, and the stock fell 7% in the post announcement trading.

Amazon’s Financials

Amazon’s third quarter revenues grew 24% to $69.98 billion, ahead of the market’s forecast of $68.83 billion. Net income of $2.1 billion, or $4.23 per share fell significantly compared with previous year’s $5.75 per share and previous quarter’s $5.22 per share. Earnings failed to meet the market’s expectations of $4.59 per share as well. The miss in earnings was attributed to the company’s continued push to roll out free-one day delivery.

By segment, net product sales increased 17% to $39.7 billion and net service sales increased 32% to $30.3 billion.

Within the e-commerce business, the domestic market generated net sales of $42.64 billion and an operating income of $1.28 billion, while international operations recorded an operating loss of $386 million on sales of $18.35 billion. Amazon’s brick-and-mortar retail offerings brought in $4.2 billion in revenues with net sales falling 1% over the year.

AWS revenues grew 35% to $9 billion, marginally shy of the market’s expectations of $9.1 billion.

Amazon plans to invest in faster shipping even for the holiday quarter. It is planning to invest $1.6 billion in one-day shipping this quarter, thus impacting its earnings outlook as well. For the holiday quarter, Amazon forecast net revenues of $80-$86.5 billion with operating income of $1.2-$2.9 billion. Analysts were projecting revenues of $87.39 billion with an operating profit of $4.19 billion.

Amazon’s Upgrades

During the quarter, Amazon introduced several new features for Alexa. It now has more than 85,000 smart home products from over 9,500 unique brands that can be controlled with Alexa. It announced new Alexa smart home features and products such as the Certified for Humans program that helps customers find smart home products that are simple to set up and use. It announced an integration with the Food Network Kitchen service to Amazon devices so that customers can watch Food Network episodes, get step-by-step cooking instructions, save recipes, ask questions, and take live and on-demand cooking classes with Food Network chefs using Echo Show. It also entered into an agreement with General Motors that allows for Alexa to be integrated into vehicles across the Chevrolet, Buick, GMC, and Cadillac vehicles. Amazon also expanded Alexa’s language capabilities and the service is now available in Portuguese for customers in Brazil, Spanish for customers in the U.S., and Hindi for customers in India.

Within Prime, Amazon continued to add content to its streaming service. For the third consecutive season, it allowed Prime members to live stream NFL Thursday Night Football games. It launched several local original series globally such as All or Nothing: Brazil National Football Team and Soltos em Floripa in Brazil; El Juego de las Llaves and Derbez Family Vacation in Mexico; The Family Man in India; and season three of The Bachelor in Japan to name a few.

Within the cloud, AWS also saw several new features. Recently, it announced the general availability of Amazon Forecast, a fully managed service that uses machine learning to deliver accurate forecasts for business conditions such as product demand and sales, infrastructure requirements, energy needs, and staffing levels. Amazon claims that its predictions are up to 50% more accurate than traditional methods.

Last week, Amazon announced the acquisition of healthcare startup Health Navigator for an undisclosed sum. Chicago-based Health Navigator was set up in 2014 by David Thompson. It is known in the healthcare sector for the development of the Schmitt-Thompson protocols that have become the norm for hospital staff to guide patients to the right place through call centers. The company provides several services such as symptom-checking tools that can help with remote diagnoses and helps patients determine whether they should stay home, see a doctor or go to the emergency room.

While Amazon continues to invest in one-day shipping, it is also looking at expanding its counter pick up service. Last week, it announced that it was partnering with GNC Holdings, Health Mart, and Stage Stores, to allow its customers to access locations of these stores for their order pickup. GNC has an estimated 8,000 stores in the country. Amazon had earlier entered into a similar agreement with RiteAid.

Amazon may be making the right moves, but the disappointing outlook for the holiday season and falling earnings are causes for concern.

My read is that it is bound to be very expensive to lay down the infrastructure for 1-day shipping at this scale. The market would need to be patient with Amazon for the benefits of this investment to start hitting its bottomline.

Its stock is trading at $1,780.78 with a market capitalization of $880.8 billion. It had touched a 52-week high of $2,035.80 in July this year. It hit a 52-week low of $1307 in December last year.

Photo Credit: simone.brunozzi/

This segment is a part in the series : Cloud Stocks

. Smartsheet Acquiring Bootstrapped Startups to Drive Growth
. Bootstrapped Unicorn Atlassian is Acquiring Capital Efficient Startups
. Netflix Price Hike Ruffles Competition
. How Will Carbon Black Differentiate?
. ServiceNow Grows Through Addition of Capital-Efficient Startups
. Zendesk and Freshworks Follow Different Acquisition Strategies
. Tableau Grows Through Small Acquisitions
. Open Platform Strategy Stands Intuit in Good Stead
. Will GoDaddy Follow the PaaS Route?
. Adobe Delivers Via PaaS
. A Look at Oracle’s 2018 M&A Activity
. What Apps Will Drive More Traction for Cloudera?
. Slack's App Focus Will Be Key to Post-IPO Success
. IBM Counts on its Cloud and Platform for the Turnaround
. Atlassian Acquires From its PaaS Marketplace
. What Should SAP Acquire to Triple its Value by 2023?
. Expect ServiceNow to Acquire From App Marketplace
. Should Follow a PaaS Strategy?
. How Upwork Can Leverage the Virtual Company Trend
. Qualys Scouting For Acquisitions
. Should SAP Acquire Zendesk or Freshworks?
. HubSpot Counts on its API Strategy
. SurveyMonkey Eyes Acquisitions for Growth
. Workday Wants to Disrupt Cloud Computing Using Machine Learning
. Einstein and Open-Source Platform Lead the Charge for Salesforce
. DocuSign Prepares to Beat Rival Adobe
. Veeva Soars, But Dassault Acquires Medidata for $5.8 Billion
. Tableau Acquisition Signals Massive Analytics Push for Salesforce
. Oracle Joins Hands with Microsoft to Take on Amazon
. GoDaddy is Making Strategic Acquisitions for the Next Level of Growth
. Alteryx Sees Strong Momentum
. Adobe Leveraging Magento and Marketo to Deliver Blockbuster Performance
. Is Slack Overvalued?
. How Will Cloudera Address the Competition?
. Zoom is Not Bothered by Cisco or Microsoft
. Domo Counts on Enterprise Revenue for Growth
. Netflix Plays with Pricing and Games to Attract Subscribers
. CrowdStrike Has a Successful IPO
. Atlassian Crosses the Billion Dollar Revenue Milestone
. ServiceNow Believes Strength Lies in Tie-ups
. Partnerships are the Mantra for BlackLine
. SurveyMonkey Counts on Enterprise Segment for Growth
. HubSpot Soars to a New High
. Intuit Pushes AI to Simplify Tax Filing
. Splunk Sees Strong Cloud Momentum
. Forescout Partners with Big Names
. Smartsheet Tapping into the Government Sector
. Salesforce Continues its Shopping Spree
. Palo Alto Networks Targets the IoT Security Market
. DocuSign Focuses on the Mortgage Sector
. Oracle Brags About Autonomous Database
. Blackbaud Acquires YourCause to Grow Addressable Market
. The Market Expects a Lot More from Adobe
. Anaplan Makes its First Acquisition Post IPO
. Activist Investor Drives Market Interest in Box
. MongoDB's Formula for Success
. Coupa Aims for $1B Revenue
. Dropbox on a Rocky Road
. Medallia Banks on Acquisitions
. IBM Banks on AI
. Time For Skepticism with Netflix
. SAP Riding High on the Cloud
. Amazon's Faster Shipping Hurting its Earnings
. ServiceNow CEO Change Signals Focus on Acquisitions
. Will Google Acquire Fitbit?
. HubSpot Focuses on Its Platform
. BlackLine Partners with Google Cloud
. Rapid7’s Focus on Cloud SIEM Pays Off
. Splunk Bets Big on Data Streaming
. Intuit's QBO Scores Big
. VMware Builds Up With Acquisitions
. Palo Alto Targets $5B Revenue by 2022
. Workday Targeting Procure-to-Pay Cycle
. Will Salesforce Acquire DocuSign?
. Okta Targets Enterprise Customers
. MongoDB Eyeing China With Alibaba Partnership
. Twilio Counts on API Upgrades for Growth
. Adobe Revs up its Experience Platform
. Top 20 for 2020
. Anaplan Sees Expanding Use Cases
. Dropbox Gears Up to Regain Lost Valuation
. Forescout Fails to Deliver
. Enterprise Bet Pays Off for SurveyMonkey
. SAP Bets Big on Experience Management
. Twilio Steps up Investment in 2020 to Preserve Growth Momentum
. Zendesk, Freshworks Focus on Marketplaces and Integrations
. Proofpoint Targets Insider Threats Through Acquisition
. RingCentral's Powerful Partner Strategy Would Augment with PaaS
. Qualys Counts on Google and Microsoft for Growth
. Shopify Soars on Improved Merchant Offerings
. HubSpot Believes in the Importance of PaaS
. BlackLine Remains Focused on SAP Integration
. Recently Public Cloudflare has New Edge
. GoDaddy is on a Shopping Spree
. Intuit Targets Online User Base Through Acquisition
. Should Palo Alto Networks Acquire ZScaler?
. Why Salesforce Buying Vlocity Proves the Growing Importance of PaaS
. Datadog Performing Well Post Recent IPO
. Workday Should Open Up About its PaaS Success
. Anaplan Focuses on API Connectors for its Platform
. Veeva
. Five9 Strengthens its PaaS Focus
. RealPage Brings AI and SaaS to Real Estate
. Splunk Should Open up About its PaaS Metrics
. Okta Benefiting from App Diversity
. Oracle Sees Growth Momentum
. Xero Focuses on a PaaS Strategy
. DocuSign Resilient to COVID-19
. Smartsheet Looking up to Enterprise Customers for Growth
. Paylocity Delivers Solid Results
. Q2 Holdings Expands TAM with Acquisitions
. New Relic Focuses on PaaS
. AppFolio Leverages AI for Product Enhancement
. Will Adobe Open Up About its PaaS Statistics?
. Change Healthcare Pushes APIs
. Dropbox Needs to Share API Metrics
. Upwork Improves Monetization
. MongoDB has Miles to go
. Nutanix Needs to Define a PaaS Strategy
. Cloudera Focuses on Hybrid Cloud
. Atlassian Gears Up for Growth, Unfazed by Covid-19
. Shopify Helps Merchants Pivot to Online Stores
. ServiceNow Steady in Turbulent Seas
. RingCentral Sees Strong Traction
. Twilio Hits 52-Week High Amidst COVID Crisis
. HubSpot Lowers Outlook Amidst Virus Concerns
. Proofpoint Acquiring Even Amidst Crisis
. BlackLine Looks Solid At The Face of Covid-19
. GoDaddy Continues to Acquire
. Qualys Expands Cloud Offerings to Soar to New Highs
. Zendesk Struggling Amidst the Downturn
. Alteryx Bounces Back Despite Low Outlook
. Palo Alto Networks Continues to Acquire
. Workday Extends its PaaS Strategy
. Splunk Rides High on Cloud Initiatives
. Salesforce Partners with Workday to Address the New Normal
. Veeva Scales New Highs
. Is Smartsheet’s Pullback a Buying Opportunity?
. MongoDB Soars Even in the Crisis
. Okta Reiterates Outlook
. Is Anaplan a Prospect for Oracle, SAP?
. Oracle Relies on Autonomous Offerings
. Adobe Shifts its Focus
. Paycom Confident Under Current Conditions
. DocuSign Soars to Record Highs
. Paylocity Acquires Amid Crisis
. Datadog's Integrations and Upgrades Help it Soar
. AppFolio Improves Offerings for Current Conditions
. SurveyMonkey Should Get Into PaaS
. Model N Soars to a Record High
. Appian Focuses on RPA for Growth
. Slack Beefs up its Portfolio
. Coupa Expands into Treasury Services
. CrowdStrike Soars to Record Highs
. Guidewire Expands Cloud Offerings
. Dropbox Should Focus on PaaS
. Talend Expands Data Offering Through Partners
. IBM Expands Cloud Partners
. One Medical Supports COVID-19 Care Digitally
. Microsoft Rides High on Teams and Gaming
. Investors Say Yes to nCino’s IPO
. Nutanix Focuses on Government and Media Verticals
. SAP Rethinks Qualtrics Acquisition
. Tenable Expands Into Industrial Cyber-Security
. ServiceNow Expands Ties with Zoom
. Cloudera Powers its Data Platform with Partnerships
. Atlassian Continues to Acquire from PaaS Ecosystem
. Shopify Soars to an All-Time High
. The PaaS Landscape
. HubSpot Focuses on the Enterprise Segment
. GoDaddy Restructures During COVID
. Akamai's Security Solutions Thriving
. Blackline Needs a PaaS Strategy
. Twilio - A Successful PaaS Story
. Zendesk Invests in the Future
. Qualys Continues to Acquire Indian Startups
. ZoomInfo Lists Despite COVID-19
. Analysis of Alteryx PaaS Strategy
. Fastly Needs to Diversify from TikTok
. Way to Go, Salesforce
. Intuit Continues to Acquire
. VMware Continues Buying Spree
. Analysis of Five9's PaaS Strategy
. Okta Expands Alliances to Attract Enterprises
. Palo Alto Continues to Acquire
. Analysis of Splunk's PaaS Strategy
. BigCommerce Goes Big with IPO
. Analysis of Workday's PaaS Strategy
. Analysis of Anaplan's PaaS Strategy
. Sees Strong Demand
. Analysis of MongoDB's PaaS Strategy
. Analysis of Wix's Platform Strategy
. New Relic Product Upgrades Deliver Growth
. What Should Proofpoint Acquire?
. Smartsheet Should Follow Atlassian’s Example
. Adobe's Relentless Growth Continues
. SurveyMonkey's PaaS Prospects

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