Morning Commentary
As I read the earnings results from Amazon (AMZN) last night, I was struck with how the company continues to push against conventional wisdom, and that publicly traded companies must focus on the bottom line at all costs.
I’ve witnessed major businesses cut back on administrative costs, marketing, and even research and development to post earnings above Wall Street consensus. It often works to move the stock higher, but along the way, true fundamental underpinnings deteriorate.
Jeff Bezos and company bucked the system out of the gate, and after trading on earnings for a few quarters, the company is back to building for world domination - this time in plain sight as regulators around the world circle their wagons and prepare their assault.
Amazon shares plunged after its financial results were released. However, something tells me it’s a temporary condition, as the company is willing to live while keeping an eye on a much bigger prize: World Domination.
Amazon Spending (investments):
The company announced it will increase its salesforce three-fold over the next three years. In many ways, Amazon and its CEO Jeff Bezos reminds me of the iconic photo by Lewis Wickes Hine’s “Powerhouse Mechanic,” but on a much larger scale.
There is the determination, the sense of power, and the sense of accomplishment. The stock got whacked, but that’s nothing new. What is new is a return to focus on top-line revenue and building a powerhouse that might be too big to dismantle.
Spelling Out Success: Alphabet
Meanwhile, Alphabet (Google) focused on lower cost and fatter margins, and Wall Street loved the results:
The company saw ad revenue surge to $32.6 billion from $28.09 billion, and earnings of $14.21 against consensus of $11.30.
Alphabet has its own powerhouse building projects, including YouTube, which was the second-largest contributor to revenue growth (this asset is why this stock must remain in any 401K).
Other Powerhouse Financial Results:
Intel (INTC)
Starbucks (SBUX)
Additional Winners
Portfolio Approach
We’ve issued more profit alerts in the model portfolio.
Communication Services |
Consumer Discretionary |
Consumer Staples |
1 |
4 |
1 |
Energy |
Financials |
Healthcare |
1 |
2 |
1 |
Industrial |
Materials |
Real Estate |
2 |
3 |
1 |
Technology |
Utilities |
Cash |
3 |
0 |
1 |
Today’s Session
More earnings results are out this morning.
McDonalds (MCD)
Revenue and earnings were okay, but same store comparable sales and pricing power improved.
McDonalds 2Q 2019 Comp Sales |
Actual |
Estimate |
United States |
5.7% |
4.5% |
International |
6.5% |
5.1% |
Guidance was a little light, but like its larger rivals, the company is increasing investments to grow presence in health and conversation.
GDP
The U.S. economy grew in the second quarter as higher consumer spending offset a decline in business investment. Gross domestic product (GDP) increased 2.1% (adjusted for seasonality and inflation) according to the Commerce Department.
Comments |
AMEN, Charles! You hit the nail square on the head with comments about how Wall Street tunnel vision on costs is sooo wrong. Cost focus is a symptom of bad CEOs who do not believe in the basic business of their companies. Steve Jobs was the poster child for a great CEO who never doubted what he was doing, despite repeated proclamations of impending disaster from the Wall Street “expert”s and analysts who never built or ran a successful business. I worked 30+ years at Texas Instruments and saw the same thing for the last decade from the top tier there. They never believed in either their people or the products they build. As a results, they cost the company 40-50 B$ in annual revenue through abandoning a prudent financial strategy in favor of an overwhelming defensive one, always believing doom was just around the corner. Bob G on 7/26/2019 8:45:36 AM |
There is more depth to your comments Charles. Jeff Bezos doesn't want profits. His mantra is "Your profits are my opportunity!". Profits are TAXED! Profits waste money you could be plowing into Growth. Traditional metrics don't apply like PE ratio to Amazon. Instead you need to looks at other factors like Growth, revenue/subscriber, Prime membership growth, geography growth and market growth for new ventures. Ken Knight on 7/26/2019 1:49:50 PM |
Great point Ken
Bezos figured this out a long time ago and save for an early dip after the IPO and a couple of bouts of weakness here and there has proven he can build a dominate company and the stock could excel at same time without wasting time with bringing cash to the bottom line. CP Charles Payne on 7/29/2019 4:48:49 PM |
Tweet |
3/28/2024 1:39 PM | Fruitful Quarter |
3/28/2024 9:50 AM | LISTEN TO THE MARKET |
3/27/2024 1:40 PM | Mostly Higher |
3/27/2024 9:32 AM | U-TURN? |
3/26/2024 1:08 PM | Everything Is Up |
3/26/2024 9:42 AM | TAPPED OUT (I HOPE YOU AT LEAST GOT A T-SHIRT) |
3/25/2024 1:33 PM | Not A Mutiny |
3/25/2024 9:35 AM | STAYING THE COURSE…BEYOND TECH |
3/22/2024 12:56 PM | Toll on Americans |
3/22/2024 9:38 AM | A TAD TIRED |
3/21/2024 1:55 PM | Building on Gains |
3/21/2024 9:30 AM | A COMFORTING FED |
3/20/2024 1:33 PM | Pivotal Moment |
3/20/2024 10:00 AM | HERE COMES THE FED |
3/19/2024 1:33 PM | Picking Up Steam |
3/19/2024 9:35 AM | RUMBLINGS IN THE BOND MARKET |
3/18/2024 1:48 PM | Mag 7 is Back |
3/18/2024 9:39 AM | THE PARTY IN SAN JOSE WILL BE LIT |
3/15/2024 1:38 PM | Realtors Settle |
3/15/2024 9:33 AM | AN UNEASY PAUSE |
3/14/2024 1:43 PM | Sticky Inflation |
3/14/2024 9:48 AM | GOING TO A GO-GO |
3/13/2024 2:16 PM | Taking a Breather |
3/13/2024 9:51 AM | ALL SO EPIC |
3/12/2024 1:42 PM | Marching Higher |
More commentary archives |
Home |
Products & Services |
Education |
In The Media |
Help |
About Us |
Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.
|