Financial Advisors Highlight Amazon in the Q1 Earnings Season
The US stock market was uplifted in April by a very strong earnings season. Among the three major indexes, the NASDAQ Composite saw the largest growth, of 2.86%, followed by the S&P 500 and Dow Jones Industrial Average, which registered gains of 2.56% and 2.19%, respectively. However, despite closing in the green for the first time in three months, the Dow Jones and S&P 500 are still 2.66% and 1.77% in the red year-to-date, while the NASDAQ Composite has inched up by 0.85% since January 1.
Analysts are crediting the earnings season with the stock market growth in April - companies continue to exhibit strength making equities attractive investments. According to FactSet data, through May 4, 81% of the companies in the S&P 500 declared their first-quarter results, 78% of which posted better-than-expected earnings and 77% having registered a revenue surprise. FactSet estimates that if the same percentage of companies that beat earnings estimates remains until the end of the season, it will be the highest share since they started tracking this data in 2008. In addition, the blended earnings growth rate for the S&P 500 stands at 24.2% and if it remains unchanged, it will be the highest earnings growth seen since the third quarter of 2010.
The sectors that beat earnings estimates were Healthcare and Tech companies. Of all nine sectors, Energy, Materials, Technology, and Financials are leading with double-digit earnings growth for the first quarter. Materials, Technology and Energy sectors are also topping the list of five sectors with double-digit revenue growth.
In macroeconomic news, the US economy grew by 2.3% in the first quarter, better than the expected 2.0%, but slightly below the previous-quarter figure of 2.9%. However, the nonfarm payroll data for March indicated that the US economy added 103,000 jobs, lower than the consensus of 193,000 and the February figure of 326,000. The unemployment rate remained unchanged at 4.1%, slightly higher than expectations of 4.0%.
Additionally, the release of the FOMC minutes from the March 20-21 meeting where the benchmark funds rate was hiked to 1.5%-1.75%, showed a rather hawkish stance, with a high possibility that rates might be hiked at a higher rate than expected. A number of participants hinted that the monetary policy might move “from an accommodative stance to a neutral or restraining factor for economic activity.”
Now that we’ve covered some of the April stock market highlights, let’s move on to individual stocks that Financial Advisors were paying attention to last month. According to TrackStar, InvestingChannel’s official newsletter capturing and analyzing the trends of Financial Advisors, the top three most searched tickers last month were Amazon.com, Inc. (NASDAQ:AMZN), Alibaba Group Holding Ltd (NYSE:BABA), and Helios and Matheson Analytics Inc. (NASDAQ:HMNY). Amazon was on Financial Advisors’ radars in April in connection with its first-quarter results, while Alibaba and Helios Matheson were in the spotlight in connection with other developments. Alibaba made multiple acquisitions, including Chinese chip designer C-SKY and the remaining stake in China-based food-delivery platform Ele.me. Helios Matheson, which was the most searched ticker among Financial Advisors in March, took a hit in mid-April following an underwritten public offering of stock. The company that owns a majority stake in MoviePass sold 10.5 million Series A-2 units and 500,000 Series B-2 units at $2.75 apiece. The stock lost over 13% in after-hours trading on April 18, when the offering was announced and continued its decline the following day as investors became concerned over the dilution that the offering will cause in the future.
The fourth most-searched ticker in April was NVIDIA Corporation (NASDAQ:NVDA), which saw mixed analyst updates. Some expressed concerns regarding the company’s exposure to cryptocurrency mining, while others, on the contrary, saw it as a headwind. The majority of the rest of the stocks made the list of the 20 most-searched tickers in connection with their financial results.
Let’s take a closer look at Amazon.com, Inc. (NASDAQ:AMZN)’s results to understand why the stock ranked as the most-searched among Financial Advisors. The eCommerce giant reported revenue up by 43% on the year to over $51.04 billion, representing the best revenue growth in six years and beat the consensus estimate by $1.10 billion. One of the main drivers of revenue growth in the first quarter was the AWS cloud platform, its revenue surged by 49% to $5.44 billion. The company also posted EPS of $3.27, versus expectations of $1.25.
Amazon.com, Inc. (NASDAQ:AMZN)’s first-quarter net profit totaled $1.60 billion, more than doubling over the year and represented the second straight quarter when the profit topped $1.0 billion, which was greatly appreciated by both investors and analysts, since Amazon is known for keeping its reported earnings low and investing them into growth. For the second quarter, Amazon’s sales guidance is between $51 billion and $54 billion, which would represent growth between 34% and 42%. Moreover, the company said it expects operating income between $1.10 billion and $1.90 billion in the current quarter, versus $628 million in the second quarter of 2017.
In addition, after disclosing its results, Amazon.com, Inc. (NASDAQ:AMZN) said it would increase the price of its Prime membership program by 20% to $119, which marks the second hike in the 13-year history of the program. During the conference call, company executives said that the increase is due to higher costs and expanded operations, such as faster shipping and larger library of music content and videos. Earlier in April, Amazon said that Prime membership program has over 100 million members globally.