Since most of the conversation around Amazon AMZN last week centered on its stellar earnings report, it’s easy to overlook the other significant news. That’s what this write-up is about. But first, a brief recap of the earnings announcement-
Stellar Q1 Earnings
Amazon reported a blowout quarter, with revenue growing 42.9% and earnings 120.9% from the year-ago quarter. More important, the earnings were 168.0% ahead of the Zacks Consensus Estimate. A stronger mix was part of the story, as was the benefit from operating leverage. The tax rate was also a factor.
After announcing a few days previously that its Prime subscribers had crossed 100 million, Amazon also raised the annual subscription fee for Prime by $20 to $119 (the monthly fee was raised some time back). Read more:Nobody Was Prepared For The Amazon Blitzkrieg
Analyst Upgrades
Even before the solid results, Credit Suisse analyst Stephen Ju put out a note reiterating his Outperform rating and raising the price target from $1750 to $1800, or roughly 16%. The optimism was based on Amazon’s product innovation that the analyst said would help it deal with harder-to-handle, non-homogeneous product verticals, positioning it to grab the next wave of retail dollars moving from offline to online.
For Q1, Credit Suisse forecast revenue of $48.87 billion, adjusted EBITDA of $5.97 billion and adjusted earnings per share of $2.93 that Amazon easily beat.
Post earnings, analysts from Macquarie and Monnes, Crespi, Hardt & Co, raised their price targets to $2,100 and $2,200, respectively, valuing the company at a respective $1.02 trillion and $1.07 trillion. Macquaire analyst Benjamin Schachter said, "We believe that even without margin expansion in core retail, the other businesses can drive significant profit growth over the coming years and will make AMZN the first trillion dollar company."
Amazon In-Car Delivery
Amazon will leave no stone unturned to deliver packages to you at the most convenient and safe location of your choice. So as a variation of its Amazon Key service, it will now deliver packages to your car’s trunk. This isn’t just about the fear of thieves making off with the packages on your porch, but more about convenience.
It’s doing this through agreements with Volvo VLVLY and General Motors GM for some of their car models launched after 2015. The service links a Prime user’s account (next-day delivery subscribers) to his Volvo on Call or GM OnStar service account through the Key app and deliveries are possible only in a publicly accessible area within a couple of blocks of the delivery address.
Amazon verifies the identity of the delivery driver and checks that the right person is at the right location and with the right package before accepting a request to unlock the car. The driver also has to check that the car is locked after delivery.
While delivery inside the house requires more gadgetry and therefore costs $220, the car service is free.
The service has been tested for six months before launching in 37 cities and Amazon has plans of further expansion.
Amazon Echo for Kids
Amazon is ensuring that parents won’t have a good reason to refuse Echo speakers inside their kids’ bedrooms. And it’s also ensuring that kids will be ensnared by its eco system. So it has now launched Amazon FreeTime on Alexa, Amazon FreeTime Unlimited on Alexa, and Echo Dot Kids Edition that are available via a “free” update. Amazon of course says that many parents are putting the things in their kids’ rooms already.
Amazon FreeTime on Alexa allows parents to set limits on kids time and activities including the ability to review activity logs, allows blocking of explicit songs and facilitates communication between rooms (like an intercom). But its most significant feature is the way it facilitates interaction with kids as soon as they say “Alexa, I’m bored.” This is quite a stroke of genius because it’s this interaction that will enable Amazon to harvest their data so Alexa gets “smarter” every day.
While each comes with specific features and the Unlimited feature has the most, letting kids ask for a wide selection of Alexa-specific content such as kid-friendly premium “skills,” music from iHeartRadio Family, 300+ Audible books, custom alarms, and more, all of which is available at no additional cost for existing FreeTime Unlimited members, or starting at $2.99 per month for Prime members.
The Echo Dot Kids Edition is the simplest way to get started with the Alexa kids experience. It comes with all the FreeTime parental controls features, one year of FreeTime Unlimited family plan, a kid-friendly case, and a 2-year worry-free guarantee.
Bezos Faces Protestors in Berlin
Amazon’s Jeff Bezos faced protestors outside Axel Springer offices, when he travelled there to collect an innovation award. The protest was organized by trade union Ver.di that has often, in the past organized strikes to make Amazon pay more to warehouse workers. This time people travelled from all over Germany and also Poland and Italy, according to media reports.
The protestors were joined by Andrea Nahles, the newly elected leader of Germany’s Social Democratic Party, the junior partner in Chancellor Angela Merkel’s government. Nahles has been very vocal about her disapproval of Amazon and its likes. She has earlier said that Bezos diesnt treat his employees right and is along with other big tech companies “world champions in tax avoidance.” “This does not deserve a prize.”
In a fireside chat with Axel Springer CEO Mathias Döpfner on Tuesday evening, Bezos declared that he was “very proud of our working conditions” and “very proud of our wages that we pay.”
Under new rules mandating the information for public companies, Amazon recently disclosed that last year, its workers’ median annual salary was $28,446, or $13.68 an hour (Walmart paid $19,177). But the number isn’t really indicative of actual pay to workers because it includes people from more than 50 countries as well as full and part-time workers in fulfillment centers, in customer-service, in software engineering roles, product management and other areas.
According to WSJ analysis, Amazon isn’t among the top payers, which are pure tech companies. Amazon, which has more significant retail operations, pays closer to what retailers generally pay. Amazon’s average hourly wage to full-time fulfillment-center workers in the U.S. is more than $15, including cash, stock and incentive bonuses, a spokeswoman told the WSJ.
Amazon Renews Thursday Night Football Deal
Amazon has renewed its deal with the NFL for an undisclosed amount. Accordingly, the company will be adding 11 NFL games for both 2018 and 2019 (will also be simulcast on Fox) to its Prime video offerings. Last year, the company paid $50 million, which brought in a total of 18 million viewers.
Amazon shares carry a Zacks Rank #1 (Strong Buy). Other buy-ranked stocks in the space are IAC/InterActive Corp IAC, boohoo.com plc BHOOY, PetMed Express, Inc. PETS and Qurate Retail Group, Inc. QRTEA. Or see the complete list of today’s Zacks #1 Rank stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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