Amazon (NASDAQ: $AMZN) is a major tech company excelling in e-commerce, cloud computing, digital streaming, and artificial intelligence. Since Jeff Bezos founded it as an online bookstore in 1994, it has grown into one of the world’s most valuable companies and a dominant force in the online retail industry.
On April 30, 2024, Amazon (AMZN) reported stellar first-quarter earnings that surpassed Wall Street expectations. The e-commerce giant’s relentless pursuit of innovation, the robust performance of its cloud computing arm, Amazon Web Services (AWS), and a strong advertising business propelled the company to new heights.
Amazon’s Q1 Financial Performance
The company reported record revenue of $143.31 billion, up 13% from last year and surpassing analysts’ estimate of $142.6 billion. The boost was mainly driven by a 17% increase in Amazon Web Services (AWS) revenue to $25 billion, expected to hit $100 billion annually. Advertising revenue reached $11.8 billion, meeting expectations and growing 24% compared to last year’s Q1.
Adjusted EPS spiked by 190.32% to $0.90, beating estimates of $0.83. Operating income surged over 200% to $15.3 billion, driven by strong performance across all segments, especially in North America and AWS divisions. Net income tripled to $10.4 billion from $3.17 billion in the previous year’s quarter.
Andy Jassy, Amazon’s President and CEO, expressed his enthusiasm, stating, “It was a good start to the year across the business, and you can see that in both our customer experience improvements and financial results.”
Capital Expenditure and Cash Flow in Q1 2024
Its Q1 capital expenditure stood at $14 billion, projected to be the lowest quarterly total for the year. Operating cash flow rose 82% to $99.1 billion over the past year, compared to $54.3 billion the previous year. Free cash flow improved from a $3.3 billion outflow to a $50.1 billion inflow for the same period.
Notably, cash and equivalents soared to $73.9 billion, up from $54.3 billion a year earlier, underlining Amazon’s financial strength and investment potential.
AI Ambitions and Cloud Dominance
Amazon is leveraging its dominance in the cloud computing market to gain a competitive edge in the burgeoning AI market. The company recently announced the general availability of its AI assistant, Amazon Q, for AWS customers, allowing enterprises to customize the AI-powered assistant to meet their specific needs.
Moreover, Amazon significantly boosted its investment in the AI startup Anthropic by a substantial $2.75 billion, reaching $4 billion. This strategic move positions Amazon to better compete with tech giants like Microsoft (MSFT) and Alphabet (GOOGL), both of which delivered impressive first-quarter results a week ago.
Amazon’s Expansion: Saudi Arabia and Mexico
Amazon announced plans to launch new infrastructure Regions in Saudi Arabia and Mexico to support its growing customer base and meet increasing demand. The company also plans to invest more than $5.3 billion in Saudi Arabia and over $5 billion in Mexico over the next several years, further solidifying its global presence.
The company’s CFO, Brian Olsavsky, hinted at significant hiring for divisions concentrating on AI products and services, underscoring Amazon’s commitment to capitalizing on the AI revolution.
Bullish 2024 Outlook
Looking ahead, Amazon projected second-quarter net sales to range between $144 billion and $149 billion, slightly lower than analyst estimates of $150.2 billion. However, operating income is projected to range between $10 billion and $14 billion, compared to $7.7 billion recorded the previous year.
Additionally, capital expenditures are projected to rise significantly from approximately $50 billion in 2023, primarily due to increased infrastructure expenses supporting the growth of AWS.
Amazon Stock Update
Before its earnings report, Amazon’s stock price dropped 3.29%, closing at $175.00 on Tuesday. On Wednesday, the stock rose 2.10% to $178.67 as of 01:17 PM EDT. AMZN shares have shown resilience, gaining 15.18% this year and an impressive 68.84% over the past 12 months compared to the 23.10% gain of the SPX in the past 12 months. The stock has seen a 52-week high of $189.77 and a low of $103.28.
AMZN is above its 50-day Moving Average of $178.11, and 200-day Moving Average of $151.33. With an average volume of 42.37 million over three months, Amazon also carries a substantial short interest of 75.73 million as of April 15, 2024, marking a 7.35% change. This short interest represents 0.82% of the float.
Analysts Bullish on AMZN
Wall Street analysts are overwhelmingly bullish on AMZN stock, recommending it as a strong buy. The average price target is $213.74, with a high of $235.00 and a low of $200.00. It translates to a potential rise of roughly 22% compared to the current price of $175.00. Additionally, analysts from Zacks believe AMZN will likely outperform the market in the near term.
Should You Buy Amazon Stock?
Amazon (AMZN) has kicked off 2024 on a high note, with its impressive first-quarter financial results underscoring its position as a market leader. The company’s AI ambitions, including its investment in Anthropic and the launch of Amazon Q, demonstrate its commitment to innovation and capitalizing on emerging technologies.
Its robust financial performance and optimistic analyst predictions provide a strong rationale for investors to view Amazon as a solid investment prospect. With a commitment to innovation and strengthening its core operations, Amazon is well-positioned to maintain its upward trajectory, offering an enticing opportunity for potential investors.
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