Amazon, Shopify, PayPal Earnings Suggest Continued Growth in eCommerce

Online retailers have not been popular investments since the worst of the pandemic, as physical retail has come back strongly with more people moving outdoors. Inflation is a top concern right now, and retail in general is not looking so good as a result.

But despite these negatives, earnings reports from one established and another relatively new online retailer show that not all companies are the same. While pandemic-style strength in demand is absent, the companies continue to grow, supporting the theory that some of the shift online has been permanent. Inc. AMZN reported an earnings miss of 33.3% in the last quarter that came from sales that beat the Zacks Consensus Estimate by 1.3%.

The Zacks Rank #3 (Hold-rated) stock’s revenue growth remains extremely strong, with the growth rate up 40% above the rate during the pandemic-influenced May 2020-May 2021 and the compound annual growth rate (CAGR) since the pandemic +25%.

In the last quarter, product revenue missed analyst estimates by 3.2% while services revenue beat by 4.0%.

By segment, both North America and AWS beat analyst estimates by a respective 6.0% and 1.6%. International was the disappointment, missing by 8.8%.

Physical stores beat by 4.7% while online sales fell 2.8% short. Other metrics were also a mixed bag: Third party seller services revenue was ahead of estimates (by 6.4%) as was advertising services revenue (by 1.4%) and other (by 90.8%, off a smaller base). But subscription services revenue missed by 1.2%.

Segment-wise operating income shows that North America and International losses came in 67.7% and 7.4% lower than expected. However, AWS profit was also 4.2% below estimates. The lower-than expected losses came from improvement in the fulfilment network that offset some of the cost pressures at worldwide stores, inflationary pressures (particularly in energy electricity rates) and fixed cost deleverage. Worldwide shipping costs […]

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