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This Is Where The Growth Is

Amazon had a blowout second quarter, with a beat on both ends, and an upbeat guidance for the third quarter sending the stock soaring by over 10% following the results, adding $14 billion in equity to stockholders. The company posted $134 billion in revenues, up 11% YoY, compared to $120 billion a year ago, with a profit of $6.7 billion, or $0.65 per share, a phenomenal improvement over a loss of $2 billion. Is this company big, or what! $134 billion in revenue for the quarter is quite amazing. The last four years of revenue look like this: $280 billion, $385 billion, $470 billion, and $515 billion last year. We can see them doing $600 billion in revenue for this year.

The company’s AWS cloud computing business posted $22 billion in revenues, up 12% YoY, which marks a slight deceleration but is remarkable nonetheless, considering the broad-based slowdown in enterprise IT spending. This segment has helped Amazon stay profitable and hold its head above water for years and still continues to do so, contributing over 70% to the company’s overall operating profits.

Despite substantial headwinds, the AWS segment leads in terms of sales growth and profitability, owing to steady demand for cloud computing infrastructure for generative AI and Machine Learning applications. In addition to this, the company’s advertising business continues to grow by leaps and bounds, hitting $11 billion in revenues, up 22% YoY, ahead of Alphabet and Meta at 3% and 12% growth, respectively.

Its core e-commerce business produced sales of $60 billion, up from $57 billion a year ago. Aided by its Prime Day event during the quarter, which saw a record 375 million items being delivered to customers at its quickest-ever delivery speeds, the segment posted an operating profit of $3.2 billion, emerging from a loss of $630 million during the year-ago period.

Following a 64% YTD rally, the stock still trades at a reasonable 2.5 times sales, offering plenty of value for investors. As it remains focused on unlocking value across its massive landed base, we expect its margins and profitability to consistently improve going forward, opening up avenues for dividends and buybacks. The company ended the quarter with $64 billion in cash, $180 billion in debt, and $54 billion in cash flow. Our Target is $205, the highest on the Street. We’re over 10% closer to that today. Our Sell Price is: We Would Not Sell Amazon.