amazon, nvidia, sp 500

Amazon’s Money Machine: Was It On or Off In The 3rd Quarter

The Amazon Money Machine: On or Off In The Third Quarter?

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It is anyone’s guess just what Amazon’s ($AMZN) quarterly result will be when it reports third-quarter results on October 27. It all depends on whether the e-commerce giant burned its profits on future investments, or decided to turn on the printing press. Just look at the company’s second-quarter results, when it missed consensus earnings estimates by nearly 72 percent.

Not many analysts on Wall Street saw the second quarter results coming. It just serves as a reminder that Amazon, for the most part, can decide reasonably easily when it chooses to make money or not. The company reported earnings of $0.40 in the second quarter, which were well below estimates of $1.40. But revenue was undoubtedly not the problem because that came in ahead of expectations by 2 percent at $37.96 billion.

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Estimates Cut

The big  “surprise” has lead to consensus earnings estimates being cut drastically for the upcoming third-quarter.  According to Ycharts, consensus earnings estimates have fallen by nearly 50 percent over the past 30 days. It looks like the chart below.
AMZN EPS Estimates for Current Quarter Chart

AMZN EPS Estimates for Current Quarter data by YCharts

Whoops. Now Wall Street is looking for a loss of $0.05,  on revenue of $42.15 billion. We’ll see just what Amazon decided to do regarding its earnings this quarter. Did they spend all their profits again on investments, or did they choose to turn on the money printing machine this quarter? We’ll see.

 

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Nvidia’s Big Question Mark

Nvidia is still the stock I am most fascinated by, and I’m eager to see how the market greets its results. The company is set to report results on November 10, and that is when we will find out how the market feels about Nvidia and its growth rates. Consensus estimates show that analyst are looking earnings to rise by only 14 percent from a year ago to $1.07, and revenue increased by 17.7 percent to $2.359 billion, for the fiscal third-quarter of 2018. Most companies would kill for those type of results, but this is Nvidia, the stock that has risen by about 320 percent since June 30, 2016, embarrassing the SP 500 return of nearly 22 percent.
NVDA Chart

NVDA data by YCharts

But for Nvidia growth rates drop significantly this quarter, at least based on the expectations.  The company has been posting 50% + revenue growth on a y/y basis now for some time.
NVDA Revenue (Quarterly YoY Growth) Chart

NVDA Revenue (Quarterly YoY Growth) data by YCharts

Nvidia Options

The options for expiration on November 17, are pricing in a nearly 11 percent move in shares of Nvidia by expiration, using the $200 strike price long straddle strategy.  One could imagine just how much wider that spread could by the time earnings results actually come.

SP 500 – 2600 Here We Come

The SP 500 looks like it getting ready for its next push higher. The index has been consolidating quietly since rising above 2550. The SP 500 had previously broken above resistance at 2,550 and now seems ready to make a move to 2,600.

SP 500

With earnings season now officially in full-swing, we will soon begin to find out just which companies are deserving of their returns in 2017.

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Tags: Amazon, Nvidia, SP 500, Quarterly Results

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