30 April 2021

Amazon Delivers Blockbuster Results, Shares Spike

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the markets today

     

What’s happening: Shares of Amazon.com Inc gained in extended trading on Thursday, after the company reported record profits for the first quarter.

What happened: Amazon, which benefited from a surge in online shopping amid the covid-19 pandemic, expects the trend to continue even as consumers resume normal activity with the gradual opening up of economies globally.

The latest results mark the fourth consecutive quarter of record profits, backed by growth in Amazon’s Prime members.

How were the results: The ecommerce giant reported growth in sales and profits for the first quarter, with both metrics surpassing consensus estimates.

  • Revenues grew 44% to $108.5 billion, beating Street expectations of $104.46 billion.
  • Profits climbed to $15.79 per share, from $5.01 per share in the same quarter last year, and handsomely topped market views of $9.54 per share.

Why it matters: Amazon has been a primary beneficiary of online shopping trends amid the pandemic, especially for home staples and other necessary items. The company is optimistic about this trend continuing post-pandemic, especially for groceries.

With the closing of various brick-and-mortar stores, Amazon reported a spike in its overall business, attracting more than 200 million Prime subscribers. It also hired more than 500,000 people to keep up with rising demand from consumers.

CEO Jeff Bezos also highlighted strong results from the company’s cloud computing unit, AWS (Amazon Web Services). “In just 15 years, AWS has become a $54 billion annual sales run rate business competing against the world's largest technology companies, and its growth is accelerating,” Bezos said.

Amazon has been taking several initiatives to strengthen its business. The company has inked an agreement with Dish Network for building its 5G network on AWS. Management is also focussing on increasing the company’s ad business in a bid to compete with ad sales leaders Facebook and Google. The company’s ad and other sales jumped 77% to $6.9 billion in the first quarter, beating market estimates of $6.2 billion.

Management guided to sales between $110 billion and $116 billion for the June quarter, versus Street expectations of $108.7 billion. The company also projected operating income between $4.5 billion and $8 billion, which reflects $1.5 billion in covid-19 related costs.

How shares responded: Amazon’s shares gained 2.4% to $3,554.00 in after-hours trading on Thursday, following the release of upbeat quarterly results. While the share price almost doubled last year, the stock has underperformed so far this year. The company’s shares have added about 8.5% year to date, versus a 13% gain in the S&P 500.

What to watch: Investors look forward to Amazon’s key Prime Day event, which is scheduled to take place in June, a month earlier than usual

The Markets Today

     

The Canadian dollar will be in focus today ahead of a basket of economic reports from the country.

Context: The CAD/USD forex pair traded higher on Thursday, recording gains for the fifth session in a row.

Details: The CAD/USD climbed to a fresh three-year high, supported by US President Joe Biden's plans for a $1.8 trillion stimulus package. While the announcement lifted investor sentiment for a global economic rebound, it exerted pressure on the greenback as investors lowered their holdings of safe havens and on account of the increase in money supply in the US.

Optimism around a global economic recovery also supported prices of crude oil, one of Canada's major exports. WTI prices jumped $1.15 to $65.01 a barrel on Thursday, following the announcement of the US stimulus package.

Meanwhile, the Bank of Canada turned hawkish, triggering speculations of the central bank reducing its bond purchases and raising interest rates in late 2022.

The loonie settled higher at 1.2281 versus the US dollar, extending gains since last Friday. With this, CAD/USD climbed to its highest level since February 2018.

What to watch: Traders await data on GDP, industrial product price index, RMPI index and budget value from Canada. The industrial product price index is projected to rise 1.6% in March. The Canadian economy, which expanded 0.7% month-over-month in January, is expected to grow 0.5% in February. While the country’s central bank has lifted its projections for economic growth this year, it expects another wave of infections to raise uncertainty.

Rising covid-19 cases remain one of the top concerns for markets, with global infections surging past 150.1 million.

Other Markets: US indices closed higher on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.71%, 0.68% and 0.49%, respectively.

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What else to watch today

     

UK’s Nationwide house price index, France’s annual inflation rate, household spending and industrial producer prices, Italy's unemployment rate and inflation rate, Spain's GDP, retail sales and current account, Turkey's balance of trade, tourism revenues and tourist arrivals, Germany’s GDP, Italy's gross domestic product, Eurozone’s consumer price inflation rate, GDP and unemployment rate, Mexico’s GDP, India’s infrastructure output and foreign exchange reserves, Brazil’s unemployment rate and nominal budget value, South Africa's balance of trade, America’s personal income, personal spending, employment cost index, MNI Chicago business barometer, University of Michigan's consumer sentiment index and Baker Hughes crude oil rigs as well as Russia’s Money Supply M2.

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