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A Look at Amazon Stock Earnings

Amazon’s earnings report was a massive drag on the stock. Let’s take a closer look at Amazon stock earnings.
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Amazon (Nasdaq: AMZN), a pillar of the MAGA stocks, announced earnings back on April 28. The earnings report was a massive drag on the stock, sending shares of the company tumbling downwards. It was an astonishing earnings report for the tech giant. And today, we’ll take a closer look at Amazon stock earnings.

Amazon Stock Earnings: The Report

To say that the Amazon stock earnings report was a shock would be a monumental understatement. It marked the first time in four years that Amazon reported a net loss. Earnings per share were expected to be $8.55, and Amazon missed, badly. Amazon reported net losses of $7.56 – a $16.11 per share difference between expectations and actual earnings. Overall, Amazon reported a total loss of $3.8 billion in Q1 of 2022.

Amazon also announced their adjusted expectations for the upcoming financial quarter. Operating income in Q2 of 2021 is expected to be between $1 billion and $3 billion. Compared to the $7.7 billion Amazon reported in Q2 of 2021, this also concerned investors. The company is only expecting revenue to grow between 3-7%, which is quite low. The decrease in company expectations can be explained by two main factors. First, a return to relative normalcy after as physical economies have reopened, or are planning on reopening. Second, broader concerns regarding a recession, and the fact that tech will experience the brunt of any market selloff. As to the second point, only the Nasdaq has entered bear market territory, the S&P 500 and DJIA have not.

Main Business Segments

Looking deeper at the Amazon stock earnings report, some things stood out. Amazon Web Services is, at this point, the best part of Amazon’s business. AWS revenue far exceeded expectations, bringing in over $18.3 billion in revenue. Sales were up 37%, and profit was up 57%. AWS accounted for over 63% of Amazon’s operating income, but only 12.5% of the total revenue. Therein lies the problem. Amazon’s other business segments were either not profitable, or marginally profitable. With the pandemic largely coming to an end, and online shopping becoming less of a necessity, Amazon’s other segments suffered. With very few people yearning for a return to an environment similar to 2020, Amazon stock has found itself back at those levels.

A Closer Look at Amazon Stock Earnings

While the slow down of most of Amazon’s business segments is concerning, that doesn’t seem like the root issue. No, in fact, upon closer inspection it seems one segment is to blame for Amazon’s losses. If you recall from the first paragraph, Amazon reported a total loss of $3.8 billion in Q1 of 2022. However, Amazon reported a net loss of $7.6 billion based on their investment into EV company Rivian. In a previous article, I discussed how Amazon owned roughly 20% of Rivian stock. However, not even Amazon’s backing was able to stop the absurd decline Rivian stock’s has experienced this year. Ford, another major shareholder, has already begun dumping shares of Rivian, and has publicly soured on the relationship.

The connection to Rivian also seems to be quite strong. Rivian reported their own earnings after market on Wednesday, and missed on revenue estimates. Yet, the stock has still surged since then. Amazon stock has experienced a related, but less pronounced, bounce as well. Amazon hit a 52-week low at market open Thursday morning, trading at $2048.11. As of today, the stock is already back above $2220, a 8.3% bounce in two trading sessions. Given that Amazon is an established, trillion dollar company, a 7.8% swing is quite large. The stock’s performance has also led the Nasdaq, a strong reason why the index is up.

Conclusions on Amazon Stock Earnings

Yes, the Amazon stock earnings report at the end of April was a shock. While it is easy to write off the company, given the massive earnings miss, some context is necessary. First and foremost, if not for the investment in Rivian, the company would not have reported a loss. Lower earnings, sure, but not the first loss in four years. Second, yes, a correction in the stock price was necessary given the shifting economic conditions. With people shifting back to physical commerce and interaction, Amazon became less necessary. Third, if Amazon Web Services was a standalone business, we might be considering it a hyper-growth stock. With that segment continuing to grow, giving up on Amazon seems foolish.

Overall, yes, Amazon probably won’t experience growth this year like it did in 2020 or 2021. However, if Rivian can manage to not plummet even further, there is no reason why Amazon can’t be a profitable company. Tempered expectations are prudent. But there is still some strength in Amazon stock moving forward.

The post A Look at Amazon Stock Earnings appeared first on Investment U.

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Economics

Hotels: Occupancy Rate Down 3.5% Compared to Same Week in 2019

From CoStar: STR: Weekly US Hotel Revenue per Available Room Reaches Highest Level Since July 2019U.S. hotel performance increased from the previous week, according to STR‘s latest data through May 21.May 15-21, 2022 (percentage change from comparable …

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U.S. hotel performance increased from the previous week, according to STR‘s latest data through May 21.

May 15-21, 2022 (percentage change from comparable week in 2019*):

Occupancy: 68.6% (-3.5%)
• Average daily rate (ADR): $151.75 (+13.4%)
• Revenue per available room (RevPAR): $104.06 (+9.5%)

*Due to the pandemic impact, STR is measuring recovery against comparable time periods from 2019.
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

Click on graph for larger image.

The red line is for 2022, black is 2020, blue is the median, and dashed light blue is for 2021.  Dashed purple is 2019 (STR is comparing to a strong year for hotels).

The 4-week average of the occupancy rate above the median rate for the previous 20 years (Blue).

Note: Y-axis doesn't start at zero to better show the seasonal change.

The 4-week average of the occupancy rate will mostly move sideways seasonally until the summer travel season.

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Economics

“This Is A Crucible Moment” – Sequoia’s Ominous Warning To Companies On How To “Avoid The Death Spiral”

"This Is A Crucible Moment" – Sequoia’s Ominous Warning To Companies On How To "Avoid The Death Spiral"

"This is not a time to panic. It is…

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"This Is A Crucible Moment" - Sequoia's Ominous Warning To Companies On How To "Avoid The Death Spiral"

"This is not a time to panic. It is a time to pause and reassess," begins the thought-provoking presentation from veteran venture capital firm Sequoia Capital.

But that's about as 'positive' as they get as the founders of the firm warn of a prolonged market downturn and urges the startups in its portfolio to preserve cash and brace for worse to come.

"We believe this is a Crucible Moment, one that will present challenges and opportunities for many of you. First and foremost, we must recognize the changing environment and shift our mindset to respond with intention rather than regret."

And in its somewhat ubiquitous historically grim outlooks (its "R.I.P Good Times" in 2008 and "Black Swan" memo in March 2020 have become legendary) don't expect a quick rescue and recovery this time.

"Sustained inflation, and geopolitical conflicts further limit the ability for a quick-fix policy solution. As such, we do not believe that this is going to be another steep correction followed by an equally swift V-shaped recovery, like we saw at the outset of the pandemic," the note said.

They argue that it will be "Survival of the Quickest"...

In particular, Sequoia urged companies to look at cutting projects, R&D, marketing, and other expenses, noting that companies should be ready to cut in the next 30 days.

"We expect the market downturn to impact consumer behaviour, labour markets, supply chains and more. It will be a longer recovery and while we can't predict how long, we can advise you on ways to prepare and get through to the other side," it said.

The founders/CEOs who face reality, adapt fast, have discipline rather than regret will not just survive, but win, noting that "It is easier to preserve cash when you have more than six months left. Recruiting is about to get easier. All the FANG have hiring freezes."

They conclude their presenttation by noting that:

"At Sequoia, we believe that the one who wins is the one most prepared."

In other words America, brace for capex cuts, hiring freezes to accelerate, and growth to evaporate.

*  *  *

Read the full presentation below:

Tyler Durden Thu, 05/26/2022 - 15:45

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Economics

Best Day For Discretionary Stocks Since COVID-Crash As Consumer Recession Bets Get Steamrolled

Best Day For Discretionary Stocks Since COVID-Crash As Consumer Recession Bets Get Steamrolled

A week ago, following dismal guidance by Walmart,…

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Best Day For Discretionary Stocks Since COVID-Crash As Consumer Recession Bets Get Steamrolled

A week ago, following dismal guidance by Walmart, Target indicated that it is seeing a shift in the consumer wallet away from the pandemic purchases and into reopening purchases - including apparel - and the pace of this shift caught some retailers off guard on inventory. WMT, COST, and TGT all saw their stocks fall sharply last week as investor concerns around a US consumer slowdown mounted and investors reconsidered just where, if anywhere, you can play "defense" in the current market.

But as Goldman's Chris Hussey writes today, this week, results from companies like DKS, Macy's, JWN, WSM, DLTR, and DG painted a decidedly different picture.

Deep discount retailers Dollar Tree - or rather Dollar 25 Tree - and Dollar General both posted strong results and DLTR raised top-line guidance.

Which isn't surprising: as we discussed in "Middle Class Is Shutting Down As Spending By The Rich Remains Robust" when consumers are trading down - as they are doing now due to Biden's runaway inflation - dollar stores see more business.

As a result, Dollar Tree surged as much as 20% on Thursday, the biggest intraday move since October 2020. Evercore ISI said Dollar Tree's move to a "$1.25 price point" last November from $1 “came in the nick of time" adding that "given the broad-based inflationary cost pressures, the 25% price increase drove material sales and margin upside for both the namesake division and the total company," wrote analyst Michael Montani who also said that while freight, transport, and labor headwinds are real, some of the pressure cited by Target last week was likely company specific.

The analyst concluded that the read-across from DG and DLTR is “favorable,” and it seems that the low-end consumer is “hanging in better than initially thought.” Or rather, the middle-class is getting crushed and it has no choice but to trade down to the cheapest retail outlets.

And with countless shorts having piled up and getting massively squeezed, the S&P 500 Consumer Discretionary Index today has risen as much as 5.6%, its best day since April 2020, as optimism on the health of the consumer returns following a string of better-than-expected earnings reports from retailers.

Top performers in the S5COND index include Dollar Tree, Dollar General, Norwegian Cruise, Caesars Entertainment and Carnival; the Discretionary Index is on pace for its best week since March 18, when the group climbed 9.3%; the index sank 7.4% as Walmart and Target reports spooked investors. The index is still down almost 30% YTD.

"Retail earnings are bullish.... with four blow-outs,” said Vital Knowledge’s Adam Crisafulli, referring to quarterly reports from Williams-Sonoma, Macy’s, Dollar General, and Dollar Tree.  “The overall retail industry is experiencing stark changes and the market is incorrectly conflating these shifts with underlying demand weakness when the actual health of the consumer is much better than it seems,” Crisafulli says, although there are many - this website included - who wholeheartedly disagree with his optimistic view of the US consumer.

Remarkably, thanks to today’s rally, even Burlington Stores, which sank as much as 12% in premarket on disappointing results, is trading up as much as 11% and some say, the rally helped reverse the earlier tumble in NVDA shares.

The discretionary group is also getting a boost from airline operators Southwest and JetBlue, helping travel-related names, while on the economic front, better-than-expected personal consumption (for the revised Q1 GDP print). and jobless claims may be adding to the bullishness according to Bloomberg.

Tyler Durden Thu, 05/26/2022 - 15:00

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