How Amazon Bucked The Trend

Technology stocks have lost a famous amount of value in recent weeks. This sector has led the market for most of the 21st century. The FAANG stocks alone, five of the biggest names in tech, account for literally a fifth of the entire stock market capitalization.

The team at Action Alerts Plus wrote recently that Amazon’s latest results sparked gains “in response to several items contained in the company’s December quarter earnings report and outlook, including better than expected profits for the quarter and revenue for its Amazon Web Services business, rising 39.5% year over year to $17.78 billion.”

In addition “Revenue for the quarter rose 9.4% year over year, led by revenue gains in North America e-commerce and AWS, which rose 39.5% year over year alleviating any concerns that Amazon might be losing share in cloud. Adding credence to that, the margin improvement posted at AWS clocked in at 29.8% for the December quarter vs. 28% in the year ago quarter.”

That’s not to say AAP saw nothing to worry about. Some operating losses with Amazon’s (AMZN) – Get, Inc. Report North American sector are worth paying attention to, and year-over-year revenue globally stayed relatively flat. However, for a company as dominating as Amazon, flat revenue can often be read as “it isn’t broke, so doesn’t need fixing.”

And, AAP adderd, “[w]hile we could squawk about that performance, Amazon was very clear about the impact to be had from supply chain shortages, Covid and other costs when it reported its September quarter. Yet, despite those factors the company generated $3.5 billion in operating income, significant positive cash flow and positive EPS even after adjusting for the $11.8 billion gain associated with its stake in Rivian (RIVN) – Get Rivian Automotive, Inc. Class A Report.”

Online retail has thrived during the pandemic, and Amazon was particularly well poised to own that market. To a significant degree the company has supplemented or replaced businesses that didn’t make it through the lockdowns intact. All of which is on top of the fact that Amazon’s business model is diversified across its cloud computing and AWS branches.

“We like that point of differentiation as it allows Amazon to not only grow and deliver during tougher periods, but it also allows the company to invest for future growth… Amazon shares are one to own for the long-term, and we aim to do just that.”


Bonema Dickson

Bonema Dickson

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