Amazon is expected to report earnings on Thursday 24 after market close, and the consensus EPS forecast for the quarter is $4,46, and that is below the reported earnings for the same quarter last year that came in at $5,75.
I have been watching Amazon for two decades and it`s a big surprice to see that the company is still interesting. The company has been growing since the late 90`s and have now become a huge conglomerate with many businesses on top of its core business.
Cloud computing is one of the biggest winners at the conglomerate at the moment, and that`s also one of the biggest reasons why investors are holding their shares. It`s not their e-commerce business I`m looking at right now. It`s simply AWS (Amazon Web Services).
AWS made up about two-thirds of Amazon`s operating income last quarter. 13% of Amazon`s revenue comes from AWS. This is one of the most interesting part of the conglomerate with its great business model.
AWS grew 49% in the same quarter last year, and last quarter AWS reported a 37% growth and that is still a very great number. But it costs. Last quarter, Amazon reported that they had invested heavily in AWS.
Amazon added more personnel to the marketing team as well as the AWS`s technical team. Money makes money, and these investments should pay off in the long run.
Amazon have big competitors out there and one of the biggest are Rakuten in Japan and Alibaba in China. I receive many packages from them all and free and fast delivery is critical important to them all.
Jeff Bezos knows it and that`s why they now are in direct competition with FedEx and UPS to name a few. Amazon have recently started to ship third-party goods through its own logistics system, and that`s probably why FedEx made a decision to cut ties with them. This is probably why FedEx also reported negative results in its recent earnings.
According to Rakuten, Amazon has gone from shipping 15% of its own packages in 2017 to 50% today. Will they continue to ship its own packages through its own logistics system, and what is the percentage?
The shipping cost accelerated and can increase. On top of that Amazon still have its one-day shipping strategy which is a strategy not all of the e-commerce giants can follow up. I receive many packages from Ebay and sometimes it can take weeks and months to see the item arrive. But they have a different strategy.
Investors should look at it in the long run and keep in mind that the shipping cost can drop when the drones are coming to play the game. But it remain to see when that is happening.