Amazon Is Just Having Fun

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Is Amazon just screwing with Wall Street analyst or what? Last quarter the e-commerce giant missed analyst EPS estimates by nearly 72 percent. This quarter the company reported diluted EPS of $0.52, beating analyst estimates for a loss of $0.01.

When looking and comparing the result from the second quarter to the third quarter, it is striking because Amazon reported income before taxes of $316 million, while in the second quarter the company reported income before taxes of $666 million.

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The only reason why Amazon results on EPS were so much stronger than estimates was because Amazon only paid 58 million in taxes for the third quarter, versus $467 million in the second. Amazon would have had a loss in the quarter. The tax saving allowed Amazon to have net income of $256 million.

It wasn’t because Amazon suddenly decided to spend less because R&D and Marketing remained pretty much unchanged for the third quarter versus the second quarter.

As for the fourth quarter, analysts will now be forced to raise all those estimates again, only for Amazon to do something unexpected in the fourth quarter.  The analyst shouldn’t even bother trying to figure it out.

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Celgene

There were so many earning today that we can’t go through all of them, but one that clients of Mott own, and I’m still trying to understand better is Celgene. The stock got crushed last week, on the discontinuation of trials for its Drug GED-0301.  So rightfully, Celgene updated guidance for the long-term, for the year 2020 to be exact. They lowered revenue estimate to a $19.5 billion at the mid-point, from $21 billion, and took EPS guidance down to $12.50 per share, from $13.00.

The stock tanked today. On October 4, the stock was trading at about $147; it closed at $99.99 on October 26. The first wave of selling came after the announcement of the trial discontinuation, on October 5. The second wave happened today when the stock fell again. If Celgene does earn $12.50 in 2020, it would mean the stock is trading at less than ten times 2020 earnings and about four times future sales.

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I was reading in place, some of the weakness in the stock was due to the Otzela, with revenue for the coming in about $100 million less than estimates, at roughly $300 million. To put it in perspective the company reported revenue in the quarter of $3.2 billion. Otzela missed by $100 million, sounds like a rounding error in all seriousness.

Here’s the other thing, the company lowered total guidance by about $1.5 billion or 7 percent.

We can slice and dice things however one wants, but here is a stock trading at $147 just two weeks sitting at $100 now, a decline of 32 percent. For a 7 percent reduction in revenue for the year 2020, which will likely be adjusted a few times over the course of the next few years.

Apparently, the market has decided that Celgene should now be valued on par with Gilead. A company that has declining revenue and has declining EPS.

CELG PE Ratio (Forward 1y) data by YCharts

See…

 

CELG Revenue (TTM) data by YCharts

Something to think about.

Back tomorrow.

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Qualcomm is still battling to secure its acquisition of Dutch chipmaker NXP Semiconductors. The tender offer expires on November 17th, but with the stock trading above the $110 offer price, will the deal get done? Seeking Alpha author Michael Kramer says it won’t close at that price.

 

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Michael Kramer and the clients of Mott Capital own shares of CELG

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.