Financial Advisors Keep Closer Eye on Amazon as It Posts Excellent Results; Talks about Entry Into Pharmacy Business Resurface
The US stock market had a good run last week, with all three indices gaining ground between October 23 and October 27. The S&P 500 advanced by 0.23%, although the growth was offset by a drop on Wednesday (the Index’s worst day since September 5) on the back of disappointing results of Chipotle Mexican Grill, Inc. (NYSE:CMG), which caused its stock lose over 14%, and Advanced Micro Devices, Inc. (NASDAQ:AMD), whose stock slid by over 13% after the company had posted better-than-expected results but issued a disappointing outlook. Dow Jones Industrial Average gained 0.45% last week, reaching a closing record high of 23,441.76 on Tuesday, helped by 3M Co (NYSE:MMM) and Caterpillar Inc. (NYSE:CAT), which reported their quarterly results. However, on the following day, Dow Jones had its worst day since September 5 as it lost 0.48% affected by the drop of Boeing Co (NYSE:BA).
As last week was the busiest in the current earnings season, with a third of the companies in the S&P 500 having reported their results, it’s clear that the overall stock market performance was mainly affected by companies’ earnings. However, there was other positive news that boosted investor confidence, the most important of which being CNBC’s report that House Republicans plan to introduce their tax bill on November 1 and intend to have a tax reform approved by the end of the year.
By October 27, 55% of the companies in the S&P 500 had reported their quarterly results, according to FactSet data, which also shows that 77% of them managed to post better-than-expected EPS and 67% reported revenue above the consensus estimates. In addition, the blended third-quarter earnings growth among the S&P 500 companies amounts to 4.7%.
Financial Advisors maintain their focus on the companies that are reporting their financial results, based on their most-searched tickers. According to TrackStar, InvestingChannel’s official newsletter capturing and analyzing the trends of Financial Advisors, which compiled a list of the top 20 most-searched tickers between October 22 and October 28, the tickers that captured attention from Financial Advisors last week were mostly of companies that reported their financial results, including Amazon.com, Inc. (NASDAQ:AMZN), Celgene Corporation (NASDAQ:CELG), and Visa Inc (NYSE:V), which ranked among the top 10 most searched tickers. Bank of America Corp (NYSE:BAC) ranked on the first spot, although the company did not report its results, but its board of directors did declare the regular quarterly dividend of $0.12 on Wednesday and the same day the stock registered an unusually high call options activity, which was pointed out on CNBC’s “Halftime Report”.
Let’s take a closer look at Amazon.com, Inc. (NASDAQ:AMZN), which was the second most-searched ticker last week on the back of its quarterly results. The company’s shares have gained over 11% last week, registering a 13% jump on Friday. This bump propelled Amazon.com, Inc. (NASDAQ:AMZN)’s stock to gains of 47% since the beginning of the year and made the company’s founder and CEO Jeff Bezos the richest man in the world, raising his wealth by $7 billion to $90 billion.
Amazon.com, Inc. (NASDAQ:AMZN)’s stock registered such a substantial growth on Friday because the company’s third-quarter results beat the estimates by a large margin. The company posted revenue of $43.7 billion, versus expectations of $42.12 billion, while its EPS of $0.52 were significantly better than the expected $0.03. Analysts and investors had expected lower earnings for the third quarter as they anticipated that Amazon.com, Inc. (NASDAQ:AMZN) would have spent more as it prepared for the holiday season. However, the strong growth in North American sales and AWS revenue of $4.58 billion (versus the expected $4.51 billion) helped offset the heavy spending.
The company’s revenue registered an increase of 34% on the year during the third quarter, helped by $1.3 billion provided by Whole Foods, which Amazon acquired in August. Moreover, North American sales advanced by 35% on the year to $25.4 billion, while international sales grew by 29% to 13.7 billion. In addition, AWS sales surged by 42% on the year.
Investors are now looking forward to the fourth quarter, which given that it includes the holiday season, is the most important for the company and is the period when it generates the most sales. Amazon.com, Inc. (NASDAQ:AMZN) projected fourth-quarter revenue in the range of $56 billion to $60.5 billion, which compares well with estimates of $58.9 billion.
In other news, St. Louis Post-Dispatch reported last week that Amazon had obtained licenses to become a wholesale drug distributor in 12 US states. The report reinforced previous suggestions that Amazon.com, Inc. (NASDAQ:AMZN) is seriously considering getting involved in the prescription drugs industry. The development put a dent in the stocks of many drug retailers. Moreover, according to WSJ, which cited sources familiar with the matter, the potential threat of Amazon, was the main reason that sparked CVS Health Corp (NYSE:CVS) to make an offer to buy Aetna Inc (NYSE:AET) for $200 per share last week.