- Another strong earnings report is likely on the way from Amazon (NASDAQ:AMZN) amid record profits, surging sales and subscriber growth. Consensus EPS estimates are seen at $9.62 (+92% Y/Y), while revenue expectations are forecast at $104.65B (+38.6% Y/Y). E-commerce has skyrocketed in the U.S. and internationally during the pandemic, while the company's cloud business, Amazon Web Services, remains a top performer. Amazon's ad business, which is lumped into the "other category," is also set to benefit from recent trends in the industry, and has emerged as a growing player in online advertising.
While "shelter in place" benefits may recede over time, Wedbush analyst Michael Pachter expects them to have some "lasting impacts." "We think that new habits learned during the pandemic may be difficult to break for many Prime customers, namely the convenience of grocery shopping," he notes. "We think that SIP accelerated the growth of Amazon Fresh and we expect customers won during the pandemic to remain customers." Pachter has an Outperform rating on the stock and $4,000 target, and values the U.S. grocery market opportunity at $800B.
Other catalysts: Investors will be watching for commentary on the upcoming Prime Day date, as well as updates on Amazon Pharmacy and the CEO transition announced earlier this year.
Stock split? Until the beginning of this week, Amazon shares were up only 5% YTD, the third best-performing component of the closely watched FAANG index (Facebook, Amazon, Apple, Netflix and Google). The advance also trailed the 12% rise of the S&P 500 and 9.5% climb of the Nasdaq Composite. Things have turned around rapidly over the past few days, on word that the company may announce a highly-anticipated stock split. Shares have climbed an additional 5% since Monday, and topped the $3,500 level in premarket trade, as options activity saw Amazon record heavy above average call volumes with about three times as many calls as puts. (20 comments)
| | Top News  Shutterstock Another strong earnings report is likely on the way from Amazon (NASDAQ:AMZN) amid record profits, surging sales and subscriber growth. Consensus EPS estimates are seen at $9.62 (+92% Y/Y), while revenue expectations are forecast at $104.65B (+38.6% Y/Y). E-commerce has skyrocketed in the U.S. and internationally during the pandemic, while the company's cloud business, Amazon Web Services, remains a top performer. Amazon's ad business, which is lumped into the "other category," is also set to benefit from recent trends in the industry, and has emerged as a growing player in online advertising.
While "shelter in place" benefits may recede over time, Wedbush analyst Michael Pachter expects them to have some "lasting impacts." "We think that new habits learned during the pandemic may be difficult to break for many Prime customers, namely the convenience of grocery shopping," he notes. "We think that SIP accelerated the growth of Amazon Fresh and we expect customers won during the pandemic to remain customers." Pachter has an Outperform rating on the stock and $4,000 target, and values the U.S. grocery market opportunity at $800B.
Other catalysts: Investors will be watching for commentary on the upcoming Prime Day date, as well as updates on Amazon Pharmacy and the CEO transition announced earlier this year.
Stock split? Until the beginning of this week, Amazon shares were up only 5% YTD, the third best-performing component of the closely watched FAANG index (Facebook, Amazon, Apple, Netflix and Google). The advance also trailed the 12% rise of the S&P 500 and 9.5% climb of the Nasdaq Composite. Things have turned around rapidly over the past few days, on word that the company may announce a highly-anticipated stock split. Shares have climbed an additional 5% since Monday, and topped the $3,500 level in premarket trade, as options activity saw Amazon record heavy above average call volumes with about three times as many calls as puts. (20 comments)
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| Trending Fed Chair Jay Powell painted a rosy picture of the U.S. economy on Wednesday, but showed no sign that the central bank would change monetary policy anytime soon due to the "uneven and far from complete" recovery. That's good news for investors, who had been watching if the Fed would budge after a series of positive economic reports. "It will take some time before we see substantial further progress," Powell added, choosing not to focus on steps that would be needed to eventually withdraw monetary support.
Bigger picture: Despite the dovish tone, stocks dipped during the post-FOMC meeting news conference as Powell addressed the topic of financial stability. "You are seeing things in the capital markets that are a bit frothy. That's a fact. I won't say it has nothing to do with monetary policy, but it also has a tremendous amount to do with vaccination and reopening of the economy." He also reiterated that any increases in inflation are likely to be transitory and would ease after supply chain issues subside.
Meanwhile, President Biden delivered is his first address to a joint session of Congress on Wednesday night. "America is ready for takeoff," he declared, unveiling his $1.8T "American Families Plan" that would expand the social safety net in the U.S. That comes on top of the $2.3T "American Jobs Plan" proposed in March, as well as the $1.9T "American Rescue Plan" that was passed to combat COVID-19. The new spending measures would be funded through corporate tax hikes and taxing the rich, and while details are still being debated, the stimulus is likely to fuel further economic growth. Stock futures rose overnight, but that was also after Apple (AAPL) and Facebook (FB) lifted sentiment with two sets of bumper earnings (see below).
On tap: Thursday is the busiest day of the earnings season, with roughly 11% of the S&P 500 set to report Q1 results. That includes reports from Caterpillar (CAT) and McDonald's (MCD) before the open, as well as Amazon (AMZN) and Twitter (TWTR) after the close. Don't forget the latest jobless claims data from the Labor Department (expected to be the lowest level since the pandemic) and the first snapshot of Q1 GDP growth (forecast at a whopping 6.1% annualized rate). "It will be a solid GDP number," commented Ryan Sweet, senior economist at Moody's Analytics. "It's one small milestone in many that we have to hit before we can say we have fully recovered from the recession."
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| Earnings Apple (AAPL) shares climbed 2.5% to $137 after fiscal second-quarter earnings easily topped expectations on top and bottom lines as well as across business units. EPS of $1.40 beats estimates by $0.42, while revenues jumped nearly 54% to $89.6B, well ahead of consensus for $77.3B. The company also declared a dividend hike of 7% (to $0.22/share) and an increase of $90B to an existing share repurchase program (two sources of return closely watched by shareholders).
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