Amazon (AMZN) reported third-quarter earnings after the bell on Thursday and became the latest company to harness the power of AI to fuel growth.
The e-commerce giant says that it is using AI for AWS (Amazon Web Services). CEO Andy Jassy says that the opportunity could manifest in tens of billions of dollars. The company reportedly invested $1.25 billion in Anthropic but could end up investing up to $4 billion with time.
That being said, the company’s AI segment did underwhelm for the third quarter specifically. Analysts were looking for $23.13 billion attributed to the AWS segment, while net sales actually came in at $23.06 billion.
This figure did represent a 12% uptick year over year, though. Meanwhile, the $7 billion operating income reported is a 29% growth. CFO Brian Olsavsky said that there shouldn’t be concern about stagnation in AWS growth, as this is a delicate transition.
As a whole, the company’s 3rd quarter net sales beat the consensus of $141.56 billion at $143.08 billion actual. Profitability was up for the quarter too, as the company boasted an operating margin of 7.8%. Wall Street was expecting just 5.46%. Earnings per share also blew the expectation out of the water at $0.94 compared to $0.58 expected.
The company has been working towards better profitability since the pandemic, cutting costs in an effort to become more efficient. Amazon did note, though, that the focus would shift away from cost-cutting towards serving more customers and boosting monetization.
The market reacted positively to this news Friday morning, sending shares more than 8% higher before the weekend. There are only two analysts with a hold recommendation on AMZN right now, with the remaining 63 maintaining a buy stance.
That being said, should you buy this stock now – or is there any reason to hold off? We’ve got three things you need to see before you make your next move. Here’s what we found through the VectorVest stock forecasting software…
The Upside Potential and Timing Are Just Fair For AMZN, But the Stock Has Very Good Safety
VectorVest helps you win more trades with less work and stress by giving you clear, actionable insights through three simple ratings. These are relative value (RV), relative safety (RS), and relative timing (RT).
Each rating sits on an easy-to-understand scale of 0.00-2.00, with 1.00 being the average. But, it gets even easier. You’re given a clear buy, sell, or hold recommendation based on the overall VST rating for any given stock at any given time. As for AMZN, here’s what we found:
- Fair Upside Potential: The RV rating draws a comparison between a stock’s long-term price appreciation potential (forecasted 3 years ahead) and AAA corporate bond rates & risk. This is a far superior indicator than a simple comparison of price to value alone. As for AMZN, the RV rating of 1.06 is just above the average and considered fair.
- Very Good Safety: The RS rating is an indicator of risk that comes from a deep analysis of a company’s financial consistency & predictability, debt-to-equity ratio, business longevity, price volatility, and other factors. AMZN has a very good RS rating of 1.27.
- Fair Timing: Despite gaining 8% in Friday morning’s trading session, AMZN still has a below average RT rating of 0.89 - although this rating is deemed fair. This is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 1.08 is fair for AMZN - so where does that leave you as an investor? VectorVest currently shows a HOLD recommendation for this stock. You can learn more about this stock or the VectorVest system itself through a free stock analysis today!
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VectorVest advocates buying safe, undervalued stocks, rising in price. AMZN mostly beat the analyst expectations for the 3rd quarter, sending shares 8% higher Friday morning. The stock has fair upside potential and timing coupled with very good safety.
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