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DBS: Amazon – Buy Target Price US$136.00

Posted on November 7, 2022November 7, 2022 By alanyeo No Comments on DBS: Amazon – Buy Target Price US$136.00
Earnings miss in 3Q22; weak revenue guidance for 4Q22F
  • 3Q22 revenue of US$127bn (+15% y-o-y) led by rise in North America retail and Amazon Web Services (AWS), was in line with consensus estimates
  • Operating income of US$2.5bn (-49% y-o-y) was 14% below consensus estimates. AWS continues to contribute to operating income.
  • AMZN guides 4Q22F revenue of US$140bn-US$148bn, where the mid-point guidance is 7% below consensus estimates

During 3Q22, AMZN’s revenue was US$127bn (+15% y-o-y), meeting consensus estimates. AMZN reported 3Q22 revenue of US$127bn (+15% y-o-y) in line with consensus estimate and within the management guidance’s range of US$125bn-US$130bn. The growth in revenue can be attributable to rise in North America and AWS segments. North America rose by 20% y-o-y to US$79bn, and following suit, AWS rose by 27% y-o-y to US$21bn. While International segment sales declined by 5% y-o-y to US$28bn, however is up by 12% y-o-y excluding FX impact. Management noted that AWS experienced slowness in growth (vs mid to high 30% range y-o-y) due to customers seeking cheaper options within AWS’ offerings.

3Q22 operating income of US$2.5bn (-49% y-o-y) was 14% below consensus. AMZN recorded operating income of US$2.5bn (-49% y-o-y) during 3Q22, which was 14% below consensus estimate, but was within management’s earlier guidance of US$0-US$3.5bn. Operating income in 3Q22 largely supported by AWS which recorded US$5.4bn (+11% y-o-y), however the operating income margin was at 26% (30% y-o-y) primarily due to higher energy costs. Operating losses from North America and International segments were at US$0.4bn and US$2.5bn respectively.

4Q22F revenue to be within US$140bn-US$148bn. Management guided 4Q22F revenue to fall between US$140bn-US$148bn, implying a 5% y-o-y growth at the mid-point guidance. However, this projection is 7% below consensus forecast of US$155bn. AMZN also expects operating income to hover between US$0-US$4.0bn (vs US$3.5bn in 4Q21), below consensus estimates of US$5.1bn.

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Research - Equities Tags:amazon

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