Despite 20 Percent Increase in Q2 Net Sales, Amazon Stock Drops

Last week, eCommerce giant Amazon (NASDAQ: AMZN) announced its second quarter financials for the period ended June 30, 2019. One of the top highlights

Despite 20 Percent Increase in Q2 Net Sales

Source: Amazon

Last week, eCommerce giant Amazon (NASDAQ: AMZN) announced its second quarter financials for the period ended June 30, 2019. One of the top highlights for the quarter was net sales of $63.4 billion, a 20% increase year-over-year, compared to $52.9 billion for the same period last year. Net product sales made up $35.9 billion, or 56.6% of total net sales, and net service sales comprised the balance at $27.5 billion, or 43.4% of total net sales.

Customers are responding to Primes move to one-day delivery – weve received a lot of positive feedback and seen accelerating sales growth, said Jeff Bezos, Amazon founder and CEO, in a July 25 news release. Free one-day delivery is now available to Prime members on more than ten million items, and were just getting started. A big thank you to the team for continuing to make life easier for customers.

Other financial highlights for the quarter include the following:

  • According to The Motley Fool, subscription services, which include Amazon Prime, increased 37% to $4.7 billion.
  • Operating income for Q2 was $3.1 billion, compared to $3.0 billion in Q2 2018.
  • Net income was $2.6 billion, or $5.22 per diluted share, compared to $2.5 billion, or $5.07 per diluted share year-over-year.
  • Operating cash flow was $36.0 billion, a 65% increase yay.
  • Free cash flow grew to $25.0 billion, compared to $10.4 billion for the trailing 12 months.
  • Cash, cash equivalents and restricted cash at the end of the period was $23.0 billion.

Operational highlights include:

  • Amazon introduced a variety of new products including the all-new Echo Show 5, all-new Kindle Oasis, all-new Fire 7, all-new Fire 7 Kids Edition tablet and Echo Dot Kids Edition.
  • The number of Alexa-compatible smart home devices totals more than 60,000 from more than 7,400 brands.
  • Fire TV now has more than 34 million active users worldwide and is the #1 streaming media player in the U.S., the U.K., Germany, Japan and India.
  • Amazon and Google launched the official YouTube app on Fire TV devices and Fire TV Edition smart TVs. They also released the Prime Video app for Chromecast, Chromecast built-in devices and Android TV devices.
  • Amazons original programming for Prime Video received 47 Emmy nominations, double the number nominated last year.
  • AmazonFresh is now available in Las Vegas with ultrafast one- and two-hour delivery.
  • Amazon has expanded grocery delivery for Whole Foods Market in close to 90 metropolitan markets in the U.S.
  • Amazon Go has added two stores in New York City, so Amazon Go is now available in 13 stores in Seattle, Chicago, San Francisco and New York.
  • Amazon launched Prime in the United Arab Emirates and Amazon Flex in India.
  • In 2019, Amazon plans to hire nearly 12,000 new employees in Europe.
  • Amazon has donated $5 million to Plymouth Housing in Seattle and $3 million to the Arlington Community Foundation in Arlington, Virginia to fight homelessness.

Amazon provided the following third quarter guidance:

  • Net sales between $66.0 billion and $70.0 billion, including unfavorable impacts of foreign exchange rates
  • Operating income between $2.1 billion and $3.1 billion, down from $3.7 billion in Q3 2018

Investors were not impressed with Amazons earnings report. The day before the earnings were revealed, Amazon stock was valued at $2,000.81 per share. The day earnings were released, stock had dropped to $1,973.82, and even further on July 26 to $1,943.05 per share. Why? The Motley Fool says that Amazon missed earnings estimates and its Q3 operating income guidance is lower than anticipated. In fact, operating income could drop between 16% to 43% in the third quarter.

Insider Take:

Amazon including some statistics for Prime Day in its second quarter earnings report. However, Prime Day(s) actually took place in the third quarter, so we are not highlighting them here. Considering those shopping days – July 15 and 16 – were record sales days for Amazon, it is hard to imagine why the third quarter is expected to see such a drop in operating income while net sales are expected to see growth of 17% to 24%.

Up Next

Register Now For Email Subscription News Updates!

Search this site

You May Be Interested in: