Amazon Stock is Crashing - Here's Everything You Need to Know

Amazon is down 6% in after hours trading after the company announced its second quarter 2024 results so far the market does not seem happy about Amazon's earnings despite the company posting some pretty strong numbers as an Amazon shareholder I am always interested in how this business is performing I also been saying that I believe Amazon stock is looking cheap for quite some time so in today's video I want to quickly go through Amazon's earnings and share all of the key highlights I found explain why the stock is down right now and answer the question of if Amazon is looking like a buy today after earnings so with that being said let's just hop right into the video all right so as always I took some screenshots from Amazon's most recent earnings report and I want to go through them really quickly with all of you so right here we can see that Amazon's net sales did grow by 10% year-over-year to $148 billion for the second quarter North American Sales increased by 9% International sales increased by 7% and AWS sales increased by 19% year-over now this does mean that AWS revenue is actually starting to re accelerate which I will show you a little bit later on in this video but first we can see that operating income increased to $14.7 billion in the second quarter which is basically a double from the 7.7 billion Amazon produced last year the North American segment operating income was 5.1 billion International segment was 0.3 billion and AWS produced $9.3 billion in operating income in the second quarter moving on we can see out operating cash flow increased by 75% to $18 billion for the trailing 12 months now compared with $ 61.8 billion for the trilling 12 months as of June 30th 2023 so Amazon's operating cash flow is still growing incredibly well and as you guys know if you have been watching my channel for some time operating cash flow is the metric that I focus on for Amazon however we can also see that free cash flow increased to $53 billion for the tring 12 months compared with 8 billion in the prior year so free cash flow is also still continuing to explode over at Amazon now if we actually head over to the cash flow statement we can see that last year in the second quarter Amazon produced about $16.5 billion in operating cash flow now for this quarter they did about 25.3 billion which is an increase of $9 billion year-over-year so Amazon's operating cash flows are still continuing to grow massively year-to date Amazon has also done $ 44.3 billion in operating cash flow which is more than double what they did last year which was 21.3 billion and again we can see that operating cash flow for the trailing 12 months is now at $18 billion however we can also see that Amazon's Capital expenditures have been growing pretty significantly on the quarter they have done $17.6 billion of capital expenditures versus 11.5 billion last year so capex has grown by roughly 50% year-over-year year-to date Amazon has also spent spent $32.5 billion on capex and in the triling 12 months Amazon's Capital expenditures are now sitting at 59.6 billion so in the second quarter Amazon's capex has really started to ramp up once again now this next screenshot shows us the AWS segment of Amazon and its net sales year-over-year growth excluding foreign exchange effects so here we can see that in the second quarter of 2023 AWS was growing at roughly 12% year-over-year and we can say that since the second quarter of 2020 3 aws's Revenue year-over-year growth rates have started to re accelerate to 19% in the most recent quarter and I think that this is very bullish for Amazon right now and the reason is because Google cloud and Desir have started to see their year-over-year revenue growth rates start to decelerate a little bit in the most recent quarter which we can see right here on this chart however we can see that aw's year-over-year Revenue growth is actually continuing to grow very strongly and is now right at at 19% which is also beating analyst expectations because they thought that aws's Revenue growth was going to be around 177% so aws's Revenue growth actually beat analyst expectations and it seems like aws's Revenue growth is an outlier in the overall Cloud sector right now because again its Revenue growth is starting to re accelerate pretty massively and it looks like this trend is continuing up now if we also take a look at aws's operating income in the tring 12 months it is now sitting at $33 billion and is up 56% year-over-year so aws's overall profitability is continuing to grow massively year-over-year as well and overall I do think that this is a great thing to see for Amazon now if we take a look at all of Amazon's different business segments right here we can see that online store sales grew by 5% year-over-year physical stores grew by 4% thirdparty seller Services grew by 12% advertising Services grew by 20% year-over-year subscription Services by 10% and again AWS grew by 19% year-over-year now what is interesting is the third-party seller Services year-over-year growth rates have been coming down over the past couple of quarters for example here in the fourth quarter of 2023 they were growing by roughly 19% year-over-year and then we can see that in the first quarter of 2024 it dropped to 16% and now in the second quarter of 2024 it is at 133% so third party seller Services year-over-year growth rates have been coming down and this is the exact same story for the advertising Services segment of the business as well as the sub subcription Services segment of the business as well so it seems like Amazon's other major growth segments are starting to see their growth rates slow down except for AWS because again aws's Revenue growth is actually accelerating right now but this is not the case for the other major growth segments of Amazon's business which is something that I am watching and paying attention to and maybe this could be one of the reasons why the stock is down in after hours trading however the main reason I believe Amazon stock is down in after hours TR trading is because of their third quarter 2024 guidance so right here we can see that Amazon is guiding for sales to be between 154 billion and 158.523 revenue growth year-over-year and overall I do think that this is why the stock is down and after hours trading we can also see that Amazon is expecting operating income to come in at 11.5 to 15 billion compared with $ 11.2 billion for the third quarter last year so basically Amazon is expecting its overall operating income to grow in the next quarter on a year-over-year basis but it's not like these massive growth rates that Amazon has been seeing over the past year and this overall could suggest that Amazon's operating margin is hitting a peak and seeing its maximum potential right now at least with the company's current expenditures now I also found this image on Twitter by consensus Guru on Twitter and this shows overall what analysts were expecting for Amazon's quarter and where Amazon beat and missed so we can see that Amazon did Miss on Revenue by 0.5% so Amazon's revenue came in slightly below analyst expectations and in specific it was the international segment that analysts were more bullish on and overall the international segment did Miss analyst expectations however AWS Revenue did actually beat analyst expectations and so did the North American Revenue gross profits and gross margin also beat analyst expectations ations and so did the operating income and it actually beat analyst Expectations by 7.8% now what's super interesting is aws's operating income beat analyst Expectations by 10.5% and with aws's revenue and operating income beating analyst expectations I was actually expecting the stock to see you know not so much weakness in after hours trading but it seems like the guidance is really starting to weigh down the stock right now overall we can see that the operating margin did beat analyst expectations as well and so did the AWS operating margin EPS also beat analyst expectations however operating cash flow missed analyst Expectations by 16.9% which is not great in addition Amazon's Capital expenditures for the quarter were 17.6 billion versus analyst expectations of 15.7 billion so they came in at 12.3% higher than analysts were expecting so we can see that operating Cash Flow came in below analyst expectations and capital expenditures came in above analyst expectations and overall that is not the best thing additionally we can say that Amazon's revenue guidance for the third quarter missed analyst Expectations by 1.4% and operating income missed analyst Expectations by 14.2% so Amazon did have some beats and some misses but overall it seems like analysts are really weighing down the stock because of the guidance coming in below their own expectations so take that as you will I don't like to pay too much attention to what analysts are guiding or what they're thinking but stocks do tend to move on analyst expectations and the Real Results versus those expectations at least in the short term and for those reasons that is why Amazon is down and after hours trading at least in my own opinion now if we head back over to stock unlock really quickly we can see that Amazon was worth $11.98 trillion in the stock market when the market closed now if we multiply this by .95 because Amazon is currently down 5% in after hours trading then it means that the stock is trading for a market cap of 1.88 billion in after hours trading now we also learned that Amazon produced $18 billion in tring 12 months operating cash flow so if we divide the market cap in after hours trading by 108 billion then it suggests that Amazon is currently trading for a price to operating cash flow of 17.4 in after hours trading now now if we take a look at Amazon's historical price to operating cash flow all the way back here to 2009 we can see that the company's long-term average has been about 27.3 so a price to operating cash flow of 17.4 is significantly below Amazon's historical averages additionally if we take a look at this chart we can see that the last time Amazon traded for a price to operating cash flow of 17.4 was all the way back in March of 2010 so in terms of Amazon's price to Opera in cash flow it literally has not been this low in 14 years now so it seems like the market is very bearish towards Amazon's business right now and relative to how the market has valued the stock historically there is a strong argument that Amazon is looking quite cheap right now if we also go and take a look at Amazon's long-term financials here we can say that its revenue is continuing to grow strong and hit all-time highs the company's operating income is also exploding right now and hitting all-time highs as well now lastly if we take a look at Amazon's operating cash flow which again is my favorite metric to Value this stock and analyze the stock we can also see that it is sitting at record highs right now and continuing to explode but full disclosure stock unlock does not currently have Amazon's most recent quarter but this top line of the chart is $19 billion so when Amazon's current quarterly results come in the new bar will be right at the top of this chart which again suggests that Amazon's operating cash flow is continuing to grow pretty dang strong and I do expect this to continue for the rest of the year if we also go and take a look at Amazon's different kpi data right here we can see where the revenue growth is coming from for Amazon's business and we can say that online stores revenue is growing but not very much physical stores revenue is also growing and hitting alltime highs thirdparty seller Services revenue is also continuing to grow strongly and hit all-time highs advertising Services revenue is growing incredibly well in hitting all-time highs subscription Services revenue is also continuing to grow strong aws's revenue is continuing to grow very strong and hit alltime highs as well and is actually reaccelerating right now other segment revenue is down quite significantly North American revenue is hitting all-time highs International revenues is at an all-time high but it did go through a pretty big dip in 2023 but it looks like International Revenue is continuing to grow now and is back on the uptrend the North American operating income was negative in 2022 but now it is hitting alltime highs and continuing to grow the international operating income is also positive in the trailing 12 months now once again after being significantly negative in 2022 and 2023 and it looks like the international operating income is clearly uptrending and could maybe add to Amazon's operating income significantly if these margins do continue to expand over the coming years and lastly we can see that aws's operating income is absolutely exploding right now and hitting fresh all-time highs by far which I think is very bullish to see so overall once again it does look like a lot of Amazon's different business segments are continuing to perform very well and the business is selling for a 14-year low price to operating cash flow which ultimately leads me to believe that Amazon's stock is looking cheap relative to how the market has historically valued this business now lastly I want to do a quick DCF calculation on Amazon using the company's operating cash flow and projecting it out over the next 5 years so if Amazon can grow its operating Cash Flow by 10% annually over the next 5 years and trade for a 20 priced operating Cash Flow by 2029 then the stock could produce a compounded annual growth rate of 11.6% over the next 5 years which is a market beating return now additionally if we scroll down we can see what this looks like and this means that Amazon would have to produce $174 billion in operating Cash Flow by the year of 2029 now we can also see that Amazon's operating cash flow has been absolutely exploding and in my opinion Amazon does have a pretty strong chance of actually growing its operating cash flows at above 10% annually over the next 5 years because again if you look at this trend right here Amon Amazon's operating cash flows are currently exploding and personally I do think that Amazon's operating cash flows will probably continue to grow pretty quickly and then kind of taper off but still come in higher than $174 billion by 2029 so in my opinion I do think that Amazon can actually produce a market beating return over the next 5 years from its current share price and those are all of the reasons why and for those reasons as well I do think that Amazon is arguably still looking cheap in the market in full disclosure I have recently added more to my Amazon position but with that being said that is going to wrap up the video everyone and I would love to hear your thoughts and your comments down in the comment section below do you guys think that Amazon is currently looking cheap in the market are you adding to your position or are you avoiding the stock let me know what you think down in the comments additionally if you did enjoy this video then please remember to leave a like on it as it does help out my channel and I truly do appreciate it but with all that being said that is going to wrap up the video for today everyone so thank you so much for tuning in as always I do appreciate it and I really hope to see you all again in my next video