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【Financial Results Preview】Amazon, AWS and advertising are drawing a new growth curve. What about the shareholder return strategy?

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moomooニュース米国株 wrote a column · 23 hours ago
$Amazon (AMZN.US)$The company is scheduled to announce its 24th year Q3 (July-September) financial results after the market closes on October 31st (local time).
According to market estimates, Amazon'sQ3 revenueThe semiconductor manufacturing equipment related to technologies like lasers is strong, with a psychological improvement due to the recovery of NVIDIA's stock in the U.S.157.2 billion 51 million dollars, up 9.9% year-on-year compared to the previous year.epsThe semiconductor manufacturing equipment related to technologies like lasers is strong, with a psychological improvement due to the recovery of NVIDIA's stock in the U.S.An increase of 21.27% to $1.14 compared to the previous year.
AWSandAdvertising businesswhich may continue to bring high profit growth.
Retail businessFacing short-term challenges
The market is expected to open shortly.shareholder return plansAmazon is scheduled to announce its 24Q3 (July-September) earnings after the market closes on October 31 (local time). Market expectations for Amazon's third quarter
【Financial Results Preview】Amazon, AWS and advertising are drawing a new growth curve. What about the shareholder return strategy?
arerevenueThe semiconductor manufacturing equipment related to technologies like lasers is strong, with a psychological improvement due to the recovery of NVIDIA's stock in the U.S.157.2 billion 51 million dollars, up 9.9% from the previous year.Earnings Per Share (EPS)The semiconductor manufacturing equipment related to technologies like lasers is strong, with a psychological improvement due to the recovery of NVIDIA's stock in the U.S.Expected to increase by 21.27% from the previous year to 1.14 dollars.Market is AWSandHigh profit growth in the advertising business.Amazon is expected to demonstrate long-term growth potential due to its high profit growth in the advertising business, whilethe retail businessis expected to face challenges such as rising costs and macroeconomic uncertainties.
As of October 30, Amazonhas risen by approximately 25% year-to-dateand is performing at a median level among the "M7" mega-cap stocks in the US, nearly in line with the S&P500 index.
【Financial Results Preview】Amazon, AWS and advertising are drawing a new growth curve. What about the shareholder return strategy?
AWS and advertising: Amazon's growth engines, the future 'cash cow'.
Amazon is mainlyexperiencing high growth with two main engines: advertising and AWS.These are expected to continue to expand their scale in the future, with their share of total revenue expected to increase significantly.
● Growth trend and outlook for AWS
AWS is Amazon's cloud computing business and one of the most profitable divisions within the company.In the second quarter, AWS, after experiencing 7 consecutive quarters of decline due to customers being forced to cut costs in a challenging environment,achieved recovery for the third consecutive quarter.
2024年第2四半期、AWSの営業利益率は35.5%を記録し、同社全体の利益率である9.9%を大きく上回った。Bloombergによると、アナリストは同部門第3四半期の売上高が19.1%増の27.5 billionドルになると予想。一方、営業利益率は2.1ポイント減の33.4%and is expected to reach $80 million.
【Financial Results Preview】Amazon, AWS and advertising are drawing a new growth curve. What about the shareholder return strategy?
In recent years, AWS has consistently maintained the top position in the global cloud services market, and the current market share is around 32%.This surpasses major competitors such as Azure and Google Cloud. $Microsoft (MSFT.US)$The driving force behind AWS's growth lies in corporate digital transformation and the advancement of artificial intelligence (AI), particularly the strong demand for large-scale language models and applications in the field of machinery learning, which have contributed to AWS's growth.
【Financial Results Preview】Amazon, AWS and advertising are drawing a new growth curve. What about the shareholder return strategy?
However,AWS is also facing significant competitive pressure.Microsoft's Azure has built a significant advantage in the enterprise AI application market through deep collaboration with OpenAI. Google Cloud, leveraging the BigQuery data analysis and machine learning tools, is gaining support from specific customer segments. Furthermore, an increasing number of companies are opting for a multi-cloud strategy to reduce dependency on a single cloud service provider, challenging AWS's market share.
- Advertising Business: Prime Video leads Amazon to become a major player in advertising.
The advertising business at Amazon has been one of the fastest-growing businesses in recent years.Advertising revenue reached $12.8 billion in the second quarter of 2024, accounting for approximately 9% of the company's total revenue, with a growth rate of 20%. Although the growth rate has slightly slowed down from the 24% in the first quarter (year-on-year), it is still the fastest-growing sector. The rapid rise of the company's advertising business is supported by integrating consumer purchase data.Advertisers can accurately target customers.One of the reasons behind the rapid rise of the company's advertising business is the integration of consumer purchase data.and Helping advertisers accurately identify target customers.leading to Improved the return on advertising spend.There are times when this happens.
In particular, the introduction of Prime Video has provided Amazon's advertising business with a new growth driver.In 2024, Amazon will introduce advertising on Prime Video, targeting approximately 0.18 billion users in the USA. As more Prime members choose Prime Video as their main streaming platform for watching ad-supported content, this will become an important source of revenue for Amazon.It may become an important source of revenue for Amazon.As the proportion of advertising revenue to total revenue could increase further.
As a result, Amazon is now able to directly compete with other advertising platforms such as Google's YouTube and Instagram. $Meta Platforms (META.US)$and Instagram, among others, allowing it to compete directly with other advertising platforms.
During the previous earnings call, Amazon's management mentioned that the video advertising business is still in its early stages of development. They believe that in the future, leveraging user data and ecosystem strengths will help them gain a larger share of the advertising market.
According to Bloomberg analysts, the advertising business in the third quarter grew by 18.2% to reach 14.2 billion dollars.Despite headwinds, Amazon's retail businessare predicted.
Amazon's retail business
Amazon's retail business isThe company's main source of revenueaccounts for approximately 65% of total revenueHowever, unlike AWS and advertising businesses that boast high profit margins, the profitability of the retail business is facing various challenges.In particular, the impact of labor costs and the uncertainty of the macroeconomy is significant. In September 2024, Amazon announced a $1.5 hourly wage increase for about 0.8 million employees in the USA, raising the average hourly wage to $22.facing challenges due to the rising labor costs, especially in the face of regulatory pressures.However, the profitability of the retail business is facing various challenges. In particular, the impact of rising labor costs and the uncertainty of the macroeconomy is significant. In September 2024, Amazon announced a $1.5 hourly wage increase for about 0.8 million employees in the USA, raising the average hourly wage to $22. rising labor costsespecially amid facing regulatory pressuresThese are putting pressure on the company's operating profit.At the same time, Amazon's retail business is facing uncertainties in consumer demand.Facing uncertainties in consumer demand.Due to the instability of the macroeconomic environment, consumer spending has been restrained, leading to a decline in Amazon's average selling price (ASP).This has led to lower-than-expected revenue in the second quarter of the company, and management anticipates continued weakening consumer demand in the third quarter, as shoppers become increasingly cautious.Potential continued weakening of consumer demand in the third quarter amid increasing caution among shoppers.Potential continued weakening of consumer demand in the third quarter amid increasing caution among shoppers.And warned.
Bloomberg analysts expect the retail business to achieve a year-on-year growth rate of 4.15% in the third quarter.with revenue reaching $59.6 billion.And predict.
Investment in artificial intelligence (ai)
Regarding capital expenditures, Amazonwill continue to increase investment in artificial intelligence (ai)due to the increasing demand for AWS services and AI tools, Amazon's capital expenditures for the first half of this yearexceeded $30 billion.The management team,expects further increase in capital expenditure in the second half of the year,with a large portion of the expenditure allocated to AWS infrastructure, especially in the field of artificial intelligence. Analysts predict that Amazon's AI projects will generate billions of dollars in revenue over the next few years.
Amazon recently announced investments in the nuclear power sector, signing three related contracts at once and investing over 0.5 billion dollars.
Possibility of dividends and share buybacks: With 500 billion dollars in cash on hand, what is Amazon's shareholder return plan?
According to reports, Amazon is expected to accumulate over 500 billion dollars in cash by 2029,and this amount is at the level required for the company's operations.Significantly aboveThis means that through dividends and share buybacks, there is a possibility of returning a large amount of funds to shareholders in the future, improving shareholder returns, and stabilizing stock prices. $Apple (AAPL.US)$Started the largest shareholder return program in history in 2012, distributing dividends of $250 billion since then and implementing massive share buybacks. Amazon, as capital expenditures gradually stabilize, is also capable of similar actions.
View of Wall Street's major banks
Although there are concerns about the profit margin and performance outlook of the retail business,Jefferies has not changed its optimistic outlook on Amazon's medium-term prospects, especially its exposure to cloud demand leveraging artificial intelligence.They say, AWS growthandThe opportunity for that profit marginis a key reason for owning Amazon shares. Furthermore, as the normalization of consumer goods demand progresses,there is also a possibility of a reacceleration of retail profit margins in the second half of 2025.stated that they see as well, Amazon'starget stock price at $225 and maintained a 'bullish' rating.
Scotiabank has a buy rating on Amazon「アウトパフォーム」のレーティングと245ドルの目標株価を設定している。同行によると、アマゾンは小売、デジタル広告、AWSの分野で優位を保ち続け、新たな成長機会を多くもたらすとしているという。特に、AWSは人工知能への投資から恩恵を受け、2027年以降の年間収益成長率が15%に達する見込みだ。
モルガン・スタンレーのアナリスト、Brian Nowak氏は、アマゾンに「オーバーウェイト」のレーティングを維持し、目標株価を210ドルに設定している。同氏は、アマゾンが低コスト・低マージンの必需品に重点を置いていることが、全体の利益率を圧迫pointed out that it is restraining the profit growth of its North American retail division. However, the company is optimistic about Amazon's optimistic about the long-term growth potentialSo, expects profitability to recover after 2024."The profit challenges are considered temporary and not structural," the bank stated, maintaining a buying on dips stance as it expects multiple profit drivers until 2025.
【Financial Results Preview】Amazon, AWS and advertising are drawing a new growth curve. What about the shareholder return strategy?
Source: moomoo, Yahoo Finance, Seeking Alpha, Investing
This article uses automatic translation in part.
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