Amazon.com Inc. is projected to reach a significant milestone in its upcoming earnings report, particularly in relation to its AWS cloud-computing service.
According to BofA Securities analyst Justin Post, Amazon may have already reached, or is very close to reaching, a low point in terms of the growth rate for AWS in July. This is noteworthy as the cloud market has experienced a slowdown, and investors are anxiously awaiting signs of positive trends.
Investors will be particularly focused on AWS growth when Amazon releases its earnings report, although the date has yet to be confirmed. Post revealed that management had previously indicated that growth had decelerated to 11% YoY in April. Therefore, this time around, he will be paying close attention to any commentary during the earnings call that suggests stabilization in trends based on an improving macro environment and easing comparisons, which could serve as a potential positive for the company.
Cloud Rivalry and Comparative Analysis
There is a significant risk factor for Amazon to consider: its cloud rival, Microsoft Corp., is likely to release its results before Amazon. Microsoft's Azure cloud-computing business experienced a period of customers optimizing their spending in 2022 before Amazon did. This factor may result in a challenging set of comparisons between the two companies.
Potential Positive Outlook for AWS
However, if Azure stabilizes or accelerates in the third quarter, this could serve as a positive signal for Amazon Web Services (AWS) in the fourth quarter. Analysts believe that any positive developments in Azure could indicate a potential improvement for AWS down the line.
North America Retail Margins and Potential Improvement
Another area of interest for investors will be Amazon's North America retail margins. Analysts are optimistic about potential ongoing improvement in this segment during the third quarter. Chief Executive Andy Jassy's commentary on Amazon's ability to surpass pre-pandemic operating margins for this part of the business provides some reassurance. Additionally, there have been indications of progress in reducing per-unit shipping costs.
Wall Street's Focus on Margin Commentary
Once again, Wall Street will closely analyze Amazon's forward commentary on margins. Analysts believe there is an increasing possibility of positive retail margin surprises in 2023 due to enhancements in logistics efficiency and the strength of their advertising initiatives.
Overall, the stock is rated as a buy with a price objective of $154.
Don’t miss: 4 reasons Amazon’s stock can keep soaring
Reason 1: Unmatched Market Dominance
Amazon's unparalleled market dominance is one of the crucial factors contributing to its ongoing success. With a wide range of products and services, this e-commerce giant has positioned itself as a leader in numerous industries, including retail, cloud computing, and entertainment.
Reason 2: Continuous Innovation
The ability to innovate consistently has been a key driving force for Amazon's growth. By continuously introducing groundbreaking technologies and services, such as Amazon Web Services (AWS) and Alexa, the company has established itself as a front-runner in the tech industry.
Reason 3: Prime Membership Success
Amazon's highly successful Prime membership program has played a vital role in attracting and retaining customers. Offering countless benefits like free two-day shipping, streaming services, and exclusive deals, Prime has become an integral part of consumers' daily lives, solidifying Amazon's position as the go-to online shopping destination.
Reason 4: Expanding into New Markets
Amazon's relentless pursuit of growth is evident through its strategic expansion into new markets. By acquiring Whole Foods and further establishing its presence in the grocery industry, Amazon has set itself up for future success.
These four reasons underline why Amazon's stock continues to soar. As an investor or observer, it's crucial to recognize the immense potential behind Amazon's business model and its ability to maintain its upward trajectory in the market.
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