28 October 2022
If you are covering Amazon’s and/or Apple’s latest earnings, please find below a comment from Ben Barringer, equity research analyst at Quilter Cheviot:
Amazon
“Despite accelerating revenues, Amazon has been cut down to size by the market after missing expectations. Efficiency has yet to return to the ecommerce business and with the economic environment slowing, take up of Amazon Web Services has not been as fruitful as in the past. The cloud business has historically driven much of Amazon’s profits and as such they will be hoping that its customer-centric approach and ability to save businesses money will help drive future take up. AWS is actually helping customers optimise and lower their cloud computing bill heading into an uncertain macro environment.
“Like most US companies the dollar is also playing havoc with Amazon’s future guidance, with it too being cut as a result of the greenback. We are also seeing lower margins as a result of Prime deals and consequently Amazon will be operating in a difficult environment for a while yet.
“While the results all make logical sense, the market is not favouring tech or retail right now as quality businesses in cyclical industries take a hit.”
Apple
“Apple, meanwhile, has not cracked like the other tech firms and shows how it can be done. Hardware has seen strong growth with the iPhone continuing to drive revenue and tech upgrades to the MacBook helping sales. What is interesting is the fact Apple is seeing more demand for Pro models of the iPhone, suggesting people are willing to part with their cash for quality – something that will ultimately boost Apple’s bottom line.
“The services division did come in below consensus estimates as much of this is driven by advertising and lower App Store usage, which is now facing some cyclical headwinds. But while we should expect a slowdown in the next earnings report, the company continues to hold up well, unlike its big tech rivals.
“Interestingly, Apple has also addressed some ESG issues by saying its iPhones will now be made with 100% recycled rare earth metals. This is a positive step to sustainability and there are further steps to reduce the carbon footprint of the supply chain, and we look forward to more creative solutions from such an innovative company.”
