How Analysts Are Rating Amazon, Google, Microsoft After Strong Earnings

Last week and this week mark the peak of earnings season. With literally dozens of key stocks reporting their corporate earnings each day, 24/7 Wall St. wanted to see how analysts rated key companies after their reports. What investors need to consider here is not just the solid earnings reports, but that the Nasdaq closed above 5,000 again and is close to its all-time high from March of 2000. Inc. (NASDAQ: AMZN), Google Inc. (NASDAQ: GOOGL) and Microsoft Corp. (NASDAQ: MSFT) all deserve a special review due to much their stocks rose on earnings.

Jeff Bezos and Amazon were all about Amazon Web Services (AWS), and that was good for a 14% gain to $445.10. Google was again about search, despite all the sideshow operations, which was good for a gain of 2.9% to $573.66. Microsoft remains a turnaround story with a migration to mobile and cloud, which was good for a 10.4% gain to $47.87.

So, how much have analysts chased up the stocks since these companies reported? The answer is of course mixed, with some upgrades, some downgrades and many reiterated ratings with price target changes.

24/7 Wall St. has included a review of each corporate earnings report, and we have then followed with corporate officer commentary and with analyst calls.

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Amazon reported its first-quarter earnings for 2015, and its expectations seemed to be very high per the earnings preview. The online seller of anything posted -$0.12 in earnings per share (EPS) on $22.72 billion in revenue. The Thomson Reuters consensus estimates were -$0.13 per share and revenue of $22.43 billion, versus $0.23 EPS and $19.74 billion in revenue a year ago. Again, this quarter was all about AWS, and that is where the bulk of the commentary is centered.

Amazon also had currency headwinds, with the amount being a $1.3 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter. Amazon said that net sales increased 22% compared to first quarter 2014 outside of the currency issues.

Despite the net loss, Amazon said that operating income rose by 74% to $255 million in the first quarter. This compares to operating income of $146 million in first quarter 2014.

Amazon’s second-quarter 2015 guidance was as follows:

Net sales are expected to be between $20.6 billion and $22.8 billion, or to grow between 7% and 18% compared with second quarter 2014.

Operating income (loss) is expected to be between $(500) million and $50 million, compared to $(15) million in second quarter 2014.

Guidance includes approximately $600 million for stock-based compensation and amortization of intangible assets.

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As Amazon was all about its web services, here is what the quotes said about AWS:

  • AWS announced Amazon Machine Learning, a fully managed service that makes it easy for any developer to use historical data to build predictive models that can be used for a broad array of purposes, including detecting problematic transactions, preventing customer churn, and improving customer support.
  • AWS announced AWS Marketplace for Desktop Apps, a new category on the AWS Marketplace that makes it easy for customers to search for and buy applications for their Amazon WorkSpaces cloud-based desktops. Customers can choose from a broad selection of more than 100 applications in eleven categories, and pay by the month for the applications they use.
  • AWS announced the general availability of AWS Lambda, a compute service that runs developers’ code in response to events and automatically manages the required compute resources, making it easy to build and manage applications that respond quickly to new information. AWS also launched several new features to make it easy for mobile developers to use Lambda for mobile, tablet, and Internet of Things applications.
  • AWS announced the general availability of the Amazon EC2 Container Service, a high-performance container management service that makes it easy to run distributed applications using Docker containers on AWS.
  • AWS introduced the latest generation of Amazon EC2 Dense-storage (D2) instances, and larger, faster Amazon Elastic Block Storage (Amazon EBS) volumes. To support very large transactional databases and big data analytics, the new Amazon EC2 D2 instances offer up to 48 TB of storage and up to 3,500 MB per second of disk read throughput, while the new Amazon EBS volumes store up to 16 TB and process up to 20,000 input/output operations per second (IOPS).

Amazon Chairman and CEO Jeff Bezos said:

Amazon Web Services is a $5 billion business and still growing fast — in fact it’s accelerating. Born a decade ago, AWS is a good example of how we approach ideas and risk-taking at Amazon. We strive to focus relentlessly on the customer, innovate rapidly, and drive operational excellence. We manage by two seemingly contradictory traits: impatience to deliver faster and a willingness to think long term. We are so grateful to our AWS customers and remain dedicated to inventing on their behalf.

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