[Earnings Preview] Amazon Approaching Earnings Announcement! Pay attention to the growth of AWS and the retail business, what is the future of shareholder returns?

According to Bloomberg's forecast, Amazon's AWS business sales for the second quarter of 2024$25.975 billion, up 17.32% year over year. As for Morgan Stanley, Amazon's AWS sales compared to the previous yearIt needs to be increased by at least 18%It is anticipated that this will establish the position of AWS' generative AI in the minds of investors, and it is also possible to show investors a high growth rate during the period when large-scale capital expenditure is carried out.

Recent data trends suggest that Amazon will perform well in the second quarter. In the analysis of aggregated card data from BofA and Bloomberg Second Measure,Online spending has accelerated more than expectedIt became clear what they were doing. This is contrary to some analysts' predictions that online retail spending will drop drastically. The acceleration in consumption is likely to benefit Amazon's retail sector, reflecting continued consumer confidence and strong online shopping habits.

Amazon has ended the summer “Prime Day” sale event, and according to breaking news,Great successSeems like it was. In fact, according to Adobe Analytics data, online sales for Prime Day in July started last summer11% increase to $14.2 billionAs a result, it exceeded analysts' predictions. According to Amazon, this Prime Day is the biggest shopping event ever, and more products were sold during the 2-day event period than any Prime Day in the past.Record high salesIt is said that they did. According to Adobe, this record sales figure was mainlyBack-to-school shoppingThis is due to consumers purchasing new electronic devices such as tablets and televisions.”Product refresh cycleIt is said that it is due to”. Adobe will have consumers on Prime Day this summerThe amount spent per order increased from an average of $54.05 a year ago to $57.97It points out.

Due to this rate of growth and the expansion of market share in the e-commerce field, JPMorgan last monthAmazon will surpass Walmart to become America's largest retailer by the end of this yearI predicted that would be it. At the financial results briefing after the financial results are announced, traders will search for information on the impact of Amazon's Prime Day event on business results. This isThird quarter earnings guidanceIt may be included in.

Amazon advertising has shown impressive growth, and revenue for the first quarterA sharp increase of 24% compared to the previous yearI did it. Sponsored ads are still a major driving force, but recentlyAds introduced to Prime VideoWhat was doneProviding significant growth opportunities over the next few yearsIt can be seen as something.

According to analysts, there is a high possibility that Amazon's ad revenue will grow this quarter and the second half of this year as advertising development on Prime Video progresses. According to Wedbush analysts, in a recent survey, advertisers advertising on Amazon87%answered that advertising spending increased from last year in the 2nd quarter,91%It is said that they answered that they plan to increase advertising spending in the 3rd quarter.

According to data compiled by Bloomberg, as of the end of '23, Amazon's cash on hand was over 86 billion dollars. It generated $32.2 billion of free cash flow last year and is expected to increase to $61.2 billion this year. Amazon's cash on hand is expected to exceed 100 billion dollars this year, and following other super-large high-tech stocks, it seems that the time is ripe for generous shareholder returns.

An Amazon spokesperson mentioned that Brian Olsafsky, Chief Financial Officer (CFO), stated at the financial results briefing for the previous quarter that capital investment and debt repayment will continue to be prioritized over shareholder returns. However, Amazon's free cash flow is expected to nearly double this year, and the companyWe can start strengthening shareholder returnsThere are many views.

Amazon says about shareholder returnsEven if it's not the 2nd quarter financial results, they will be announced in the next few quartersIt is anticipated that they will. Andrew Zamfotis, portfolio manager at Ami Asset Management, said, “The start of dividends may be inevitable. It will also be a signal that Amazon will improve spending and profitability,” he pointed out. “Amazon clearly has that financial margin. They were reluctant to return shareholders even when business performance was strong, so it would be very meaningful if they followed other companies in the same industry and started dividends or raised the pace of stock buybacks.”

Although the outlook for the second quarter is bright, BofA's Post warns that excessive expectations and rising transportation costs are potential risks with regard to profit guidance for the third quarter, and caution is necessary.

Historically, Amazon's third quarter guidanceConservative trendsThere are, and in many cases, they fall short of Wall Street's predictions, but the average over the past 3 years33% upsideI'm showing it. Post provides sales guidance for the third quarterRanges from $155.5 billion to $160.5 billionIt is predicted, and growth of 5% compared to the previous quarter is suggested. Also, GAAP operating incomeRanges from $12 billion to $15.5 billionIt is expected to be.

According to Market Chameleon, the probability that Amazon stock prices will fall on the past 12 quarterly earnings announcements is about50%What is the average stock price fluctuation rate± 7.7%What is the maximum decline-14.0%What is the maximum increase+13.5%。