The Motley Fool

Why Amazon’s share price is set to leap on the opening bell

Amazon.com, Inc. (NASDAQ: AMZN) has come a long way since 1995 when the company started out as an online bookstore.

Today Amazon has a market cap of US$1.5 trillion (AU$2.1 trillion). And founder and CEO Jeff Bezos counts among the richest people on Earth.

But judging by the company’s second quarter results — released yesterday (overnight Aussie time) — both Bezos and the Amazon share price could have much more growth ahead.

The company reported a 42% increase in operating cash flow, to US$51.2 billion. That’s compared to the previous 12 months ending 30 June.

Net sales grew to US$88.9 billion, up 40% from its second quarter in 2019. And according to the company’s third quarter guidance, net sales are forecast to grow from 24% to 33% compared to the third quarter in 2019.

Net income also rose to US$5.2 billion. That works out to earnings per share (EPS) of US$10.30, compared to US$5.22 EPS in the same quarter of 2019.

Additionally, the COVID-19 lockdowns saw online grocery sales triple, while Amazon increased its grocery delivery capacity by 160%.

A word from Amazon’s founder and CEO, Jeff Bezos

This was another highly unusual quarter… As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand — purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners. We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions. And third-party sales again grew faster this quarter than Amazon’s first-party sales. Lastly, even in this unpredictable time, we injected significant money into the economy this quarter, investing over $9 billion in capital projects, including fulfillment, transportation, and AWS.

How did investors in Amazon stock react?

Amazon trades on the Nasdaq Composite (INDEXNASDAQ: .IXIC) at US$3,051.88 per share. The Amazon share price closed up 0.60% on Thursday. The share price is up 6.5% in after-hours trading.

While the company trades at a nosebleed price to earnings (P/E) ratio of 145 times, Amazon’s share price has been trending higher since 1997, when you could have picked up the stock for US$1.73 per share! And with the company forecasting net sales to grow from 24% to 33% in the next quarter, compared to the same quarter in 2019, I believe Amazon is well-placed to see its shares run higher from here.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Related Articles...