In pre-market trading today (November 1), amazon (NASDAQ:AMZN) shares rose 6.4%. This comes after it released its latest quarterly results after the market closed last night. Given the mixed results from other mega-cap peers, I think the reaction is very telling of what could happen next.
The results
Let's start by quickly going over the details. For the quarter, revenue increased 11% compared to the same period last year to $158.9 billion. One of the main factors that helped drive this increase was the continued outperformance of the amazon Web Services (AWS) division. This ultimately filtered down to the bottom line and helped a 52% increase in the earnings per share figure.
Both the revenue and EPS figures were above analyst expectations, which generally means the stock would rebound given the positive surprise.
It wasn't just last quarter's numbers that helped the share price. The last quarter of the year is the most important for amazon, since it coincides with the holiday season. This is traditionally the most profitable time. In terms of guidance, the company expects sales to increase between 7% and 11% compared to the fourth quarter of last year. For such a large company, achieving that kind of percentage growth would be very impressive.
the future
Excluding the possible move when the market opens on Friday, shares are up 36% over the past year. Admittedly, the gains are not as big as some peers would like Metaplatformsand technology stocks are up 82% during the same period.
However, I think it's the perspective from here that could change things. Meta shares fell 4% yesterday. Because? Although the results were good, the prospects were not very encouraging. This is in contrast to amazon, where I think the company has a lot of momentum going forward.
It has a very diversified income stream. You can bet on traditional areas such as retail sales and amazon Prime services. However, it is also moving forward with new ai-powered generative features, which have the potential to increase revenue even further.
Let us also not forget that the company has a global presence. In the last quarter, sales in North America grew 9%. However, international retail sales also grew by 12%, showing that it does not depend only on one area.
Putting it together
One risk is that tech stocks aren't exactly undervalued. With a P/E ratio of 45.67, it is well above what you would look for as fair value. Of course, part of this is due to the possibility of future earnings growth. However, even with this, the stock simply isn't cheap.
In short, I believe that amazon shares have the potential to continue rising, based on the outlook given by management. I also think some investors could trim their holdings in other tech stocks once earnings come in and allocate that money to amazon. On that basis, I'm thinking of investing some money in stocks.
