📦 Amazon beats but expects troubles ahead

Together with The Motley Fool

Good morning investors! It’s time to look at what analysts have to say as corporations face challenges due to the geopolitical situation.

Today we cover:

• Amazon beats but expects challenges ahead

• More earnings (Eli Lilly, Maersk, and others)

• How to benefit from IPOs

📊 Economy and News 

Amazon beats expectations but gives warning signals

Amazon delivered stronger-than-expected earnings and revenue for the fourth quarter but provided weaker-than-anticipated guidance for the current period, causing its stock to slip in extended trading.

• Earnings: $1.86 per share (vs. $1.49 expected)

• Revenue: $187.79 billion (vs. $187.30 billion expected)

• AWS Revenue: $28.8 billion (in line with estimates)

• Advertising Revenue: $17.3 billion (vs. $17.4 billion expected)

Amazon forecasts first-quarter sales between $151 billion and $155.5 billion, falling short of analysts’ expectations of $158.5 billion. The company cited a significant foreign exchange impact, estimating a $2.1 billion or 1.5% hit to revenue.

Based on this outlook, Amazon projects revenue growth of just 5% to 9% in Q1. If sales land at the lower end of this range, it would mark the slowest quarterly growth in the company’s history since going public in 1997.

Amazon Web Services (AWS) generated $28.8 billion in revenue, up 19% year over year, aligning with expectations. This growth outpaced the previous year’s Q4 increase of 13%, signaling continued strength in the cloud business despite concerns over slowing demand.

Also, the company is on pace for $100B+ in yearly capex. This shows the company has a lot of faith in AI, as it’s spending even more than Google.

While Amazon’s holiday quarter was strong, its cautious outlook suggests macroeconomic headwinds could weigh on growth in the months ahead. This sent the stock -3% lower after the bell.

Global hits:

• European shares hit record high as Bank of England cuts base rate by 25 bps to 4.5% expecting weaker growth and inflation spike resulting in sterling falling.

• UK construction activity tumbles in January, hit by housebuilding.

• A judge delayed the deadline for federal employees to accept the Trump administration’s deferred resignation offer pending further legal review.

Also check: The number of new unemployment benefit applications in the U.S. rose slightly last week, indicating a gradual softening of the labor market. Initial claims increased by 11,000 to 219,000 for the week ending February 1. Economists had expected 213,000 claims.

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📈 Stocks

S&P 500 6,083.57 (+0.36%)
DJIA 44,747.63 (-%0.28)
NASDAQ 19,791.99 (+0.51%)
BRENT CRUDE 76.66 (-0.52%)
* Prices as of Feb 7th, 12:20 AM UTC

More earnings are here

Here are some other major companies that announced earnings yesterday:

• 🚢 Maersk's stock surged +6% after the company reported better-than-expected fourth-quarter results, marking its best daily performance since 2020. EBITDA for the year climbed 26% to $12.13 billion, with the fourth quarter surpassing analyst expectations at $3.6 billion, up from a forecast of $3 billion. This marks a recovery after a slump in 2023, following a record-high surge in 2021 and 2022 driven by global supply chain issues. The company projects 2025 EBITDA between $6 billion and $9 billion, with global economic growth and lower interest rates expected to boost demand.

• 💊 Eli Lilly's fourth-quarter results were mixed, with strong sales of its weight loss drug Zepbound and diabetes treatment Mounjaro, but some disappointments. While earnings exceeded Wall Street expectations, sales fell short due to lower prices for Mounjaro. Both drugs have underperformed expectations for two consecutive quarters due to inventory declines among wholesalers. The company issued 2025 profit guidance of $22.05 to $23.55 per share, matching analyst forecasts, and reiterated sales guidance of $58 billion to $61 billion. Despite missing earlier expectations, Eli Lilly plans to release late-stage data on its next-gen obesity drug retatrutide sooner than expected, which targets three hunger-regulating hormones.

• 🪞 E.l.f. Beauty lowered its full-year outlook after reporting a 36% decline in profits and weaker January sales. Despite stronger-than-expected holiday revenue, Q3 earnings slightly missed estimates. Revenue rose 31% to $355 million, topping the $330 million forecast, but adjusted EPS of 74 cents fell short of the 75-cent estimate. The company now expects full-year sales of $1.3–$1.31 billion, below the $1.34 billion forecast, with EPS guidance of $3.27–$3.32, missing the expected $3.54. Shares fell -23% in extended trading.

• 💄 L’Oréal reported weaker-than-expected Q4 sales due to sluggish demand in China and a U.S. slowdown. Revenue reached €11.08 billion ($11.49 billion), up 2.5% but slightly below estimates. Full-year sales totaled €43.48 billion, just above forecasts.

• 🏖 Expedia reported revenue of $3.18 billion, surpassing analyst estimates of $3.08 billion, representing a 10.3% year-on-year growth and a 3.5% beat. Adjusted earnings per share (EPS) came in at $2.39, exceeding expectations of $2.10 by 13.9%. Adjusted EBITDA reached $643 million, outperforming estimates of $571.3 million, with a 20.2% margin and a 12.5% beat. The operating margin improved to 6.8%, up from 3.6% in the same quarter last year. Free cash flow turned positive at $7 million, a significant improvement from -$1.69 billion in the previous quarter. The company booked 86.4 million room nights, an increase of 9 million year over year. Its market capitalization stands at $21.78 billion.

• 💵 Affirm, the provider of buy now, pay later loans, reported better-than-expected fiscal second-quarter revenue. Growth in GMV, which is a key industry metric that helps gauge the total value of transactions over the reporting window, accelerated. It increased 35% from a year earlier. Revenue grew even faster than volume, increasing 47% from a year earlier, reflecting the company’s focus on strong unit economics.

• 📱 Pinterest shares jumped +17% in after-hours trading following the release of its fourth-quarter earnings report, which included an optimistic outlook. While adjusted EPS came in at $0.56, falling short of the $0.64 estimate, revenue rose 17.2% to $1.15 billion, surpassing the forecasted $1.14 billion.

💵 Personal Finance

How to benefit from IPOs

IPOs allow investors to enjoy great perks. In recent times, companies such as Airbnb and CureVac BV offered great results. The former soared 114.7% above the IPO price and the latter offered up to 596% return from the offer price.

An IPO can be an easy way to improve your financial situation. Here are some of the benefits of investing in an IPO:

• You get a chance to make quick money in the form of listing gains.

• Prices are usually low at the time of an IPO, thus offering easy entry.

• Companies offer a lot of information at the IPO stage, thus making the decision easier.

However, not all IPOs are successful. Robinhood, for example, failed despite being a big name. Its shares fell 10% within minutes of the bell ringing. Some other companies to have faced a similar fate include Uber, Etsy, and Omeros.

So, how to choose the right IPO to invest in? Here are a few pointers to remember:

• Understand the business model and look at the company's long-term prospects. Ensure the model is sustainable and don't blindly follow big names.

• Choose a company that has proven itself and has strong supporters and brokers.

• Do not look solely at the past when gauging a company, rather look at its growth potential.

• Ensure the price is right as not all IPOs are justified and some companies are known for starting ‘expensive’.

Despite all this, you may still face some challenges. Remember to be cautious because the stock market is unpredictable.

Are you ready to invest in an IPO? Here are some upcoming IPOs😀 

• Shein, date not announced.

• Discord, date not announced.

• High Roller Technologies on NYSE American expected to have a starting price of $8 to $10).

For more, check this amazing video covering how to invest in an IPO:

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