Vtrade Proposes Guardant Health (NASDAQ: GH) For Long Term Investment

Guardant Health (NASDAQ: GH)

COMPANY PROFILE:

Founded In – 2011 | Current Market-Cap – USD 4.16B

Guardant Health, Inc., a precision oncology company, provides non-invasive cancer diagnostics. It offers liquid biopsy tests for advanced stage cancer, such as Guardant360, a molecular diagnostic test that measures various cancer-related genes from circulating tumor DNA (ctDNA); and GuardantOMNI, a broader panel measuring various genes from ctDNA. The company also provides LUNAR-1 for recurrence detection in cancer survivors; and LUNAR-2 for early detection of cancer in higher risk individuals. Guardant Health headquartered in Redwood City, California.

Stock performance since IPO:

IPO Date	04-Oct-2018
IPO Range	$15 - $17
IPO Debut Price	$27.75
High Made (07-Dec-2018)	49.53

Guardant Health seems to be a good Long-Term Investment Stock for following reasons:

·         Incorporated in Delaware in 2011, Guardant Health Inc. is a precision oncology company focused on advanced analytics of molecular information throughout all stages of the disease. With two biopsy tests, Guardant360 and GuardantOMNI, and two programs assessing recurrence and early detection, LUNAR-1 and LUNAR-2, Guardant seems to be offering very innovative solutions. Keep in mind that Guardant360, for instance, has been used by more than 5,000 doctors in over 40 biopharmaceutical companies.

·         Guardant Health had a staggeringly impressive IPO that saw shares trade upwards of almost 70 percent on its first day. The market is still reeling after Guardant Health’s (NASDAQ:GH) roaring IPO took everyone by surprise, with shares of the cancer-detecting company soaring upwards by nearly 70 percent during its first day of trading. The company’s blockbuster market debut was one of the largest on the market thus far this year, wowing proponents and critics alike with its unexpected success. The California-based company still has a stormy market to navigate soon, however, and will need to prove to investors that it’s worth the pretty pennies it earned during its market debut.

·         Those keeping an eye on the market instantly noticed Guardant Health when the company made its debut, no doubt because it immediately started soaring upwards at a breakneck pace. Though Guardant Health originally intended to offer investors some 12.5 million shares at a respectable $19 per share, it quickly saw trading skyrocketing, closing at a whopping $32.20 per share. This rapid climb of almost 70 percent will doubtlessly put some wind in the company’s sails as it plunges into the open market for the first time.

·         Guardant Health has only been public for a few weeks, but it is quickly attracting attention from Wall Street. The company has received several "strong buy" ratings from analysts. In response, its stock price is up by more than a third from the date of its IPO.

·         According to S-1 filings made with the SEC, the company’s focus on precision oncology is what its executives believe will keep it afloat in the market for years to come. Virtually all the capital it gleaned from its market debut will be put forward towards further testing, marketing, and administrative purposes, the company’s prospectus notes. Guardant isn’t afraid to acquire other companies in the future, either, and could use some of the extra cash it gleaned from its particularly vibrant IPO to scoop up any competitors before they become a major threat.

·         The company’s expertise in the liquid biopsies sector could prove to be an engine that propels its growth for some time. After all, the market is currently in a liquid biopsies frenzy, with enthusiasm about this exciting way to detect cancer earlier rapidly growing around the world. Given that so many of the world’s wealthiest countries have aging populations particularly vulnerable to diseases like cancer, it’s more than safe to say the company won’t want for demand for its products anytime soon, either.

·         After its blockbuster IPO, Guardant Health likely won’t need to worry about financial matters for some time. Even its market debut was a small blip on its radar when it comes to accruing cash, however. Guardant has already raised at least $550 million thus far, illustrating that the company’s innovative approach to cancer treatments is clearly piquing the interest of some major investors in its sector. Many aspiring health ventures like Guardant’s struggle due to a lack of capital, making it a sizable safer bet than many in the eyes of some investors.

·         Guardant certainly expects to be reaping in the cash soon, too. According to the company’s prospectus, for instance, it’s projecting that “the market opportunity for our current commercial and pipeline products is over $35 billion in the U.S,” and this figure will likely continue to inflate. Given that Guardant Health’s impressive Guardant360 solution option is substantially cheaper than many leading alternatives, too, it will likely be able to price out many competitors while building a positive reputation for itself in the market.

·         Market watchers are excited about Guardant because it has established itself as a leader in the up-and-coming field of precision medicine . The company's Guardant360 technology can diagnose dozens of different types of cancers from a simple blood test. That's a highly appealing prospect considering that traditional diagnostic methods require tissue biopsies (which are more expensive and often require surgery). Guardant Health says its tests have a market opportunity of $35bn. investors are excited about liquid biopsy technology is something of an understatement judging by the 69% increase in Guardant Health’s share price on its first day trading on Nasdaq.

·         Recent results show that demand for Guardant's services are taking off. The company's revenue jumped 95% last quarter to $21.7 million. Better yet, the increased volume caused the company's gross margin to more than double to 53.7%. With lots of white space in front of this business, investors have plenty of reasons to believe that its days of hypergrowth are just getting started.

·         Guardant health expects its full-year 2018 revenue to land between $82 million and $84 million. Those are tiny numbers compared with the company's current market cap of $3.8 billion, so Wall Street is pricing this business for exceptionally strong growth. That fact will likely amp up the stock's volatility for the foreseeable future.

Disclaimer:

Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.

Vtrade Proposes to BUY Activision Blizzard, Inc. (NASDAQ: ATVI)

Activision Blizzard, Inc.

NASDAQ: ATVI

COMPANY DESCRIPTION

Founded in –1979 | Current Market Cap – 40.15 Billion USD

Activision Blizzard, Inc. develops and distributes content and services on video game consoles, personal computers (PC), and mobile devices. The company operates through three segments: Activision Publishing, Inc.; Blizzard Entertainment, Inc. and King Digital Entertainment. The company develops, publishes, and sells interactive software products and entertainment content for the console and PC platforms through retail and digital channels, including subscription, full-game, and in-game sales, as well as by licensing software to third-party or related-party companies; and offers downloadable content. It also maintains a proprietary online gaming service, Battle.net that facilitates the creation of user generated content, digital distribution, and online social connectivity in its games; and develops and publishes interactive entertainment content and services primarily on mobile platforms, such as Android and iOS, as well as distributes its content and services on the PC platform primarily through Facebook. In addition, the company engages in creating original film and television content; and provides warehousing, logistics, and sales distribution services to third-party publishers of interactive entertainment software, as well as manufacturers of interactive entertainment hardware products. Its products include various genres, including first-person shooter, action/adventure, role-playing, strategy, and others. The company serves retailers and distributors, including mass-market retailers, first party digital storefronts, consumer electronics stores, discount warehouses, and game specialty stores through third-party distribution and licensing arrangements in the United States, Australia, Brazil, Canada, China, France, Germany, Ireland, Italy, Japan, Malta, Mexico, the Netherlands, Romania, Singapore, South Korea, Spain, Sweden, Taiwan, and the United Kingdom. Activision Blizzard, Inc. is headquartered in Santa Monica, California.

RECOMMENDATION

We rate Activision Blizzard, Inc. a Buy at USD 51 for a target of USD 61 in two months.

Below are the basic reasons to recommend this stock as a Buy.

·         Activision popularity is primarily driven by its well-known franchises, which will continue to fuel top-line growth. It currently has eight $1 billion franchises. Call of Duty is one of the biggest growth drivers for the company. The latest edition of Call of Duty: WWII was the top-selling console video game in 2017 globally. Destiny 2 was the second-highest selling console game in North America. Moreover, Overwatch has over 40 million players now following its release.

·         Compared with the physical platform, digital games are more profitable due to minimum packaging cost. This cost effectiveness will help publishers to use the digital format to keep a popular franchise running profitably over a longer period. Plus, Activision has been trying to adopt an all year-round model instead of a launch-based model in which majority earnings and profits are derived in the first week to boost engagement. This bodes well for long-term performance.

·         In 2016, Activision scooped up Ireland-based King Digital Entertainment for $5.9 billion. The acquisition is boosting the company’s presence in the lucrative mobile gaming arena. As per Newzoo, by 2020, more than 50% of the revenues will come from mobile games. King Digital’s Candy Crush Saga and Candy Crush Soda Saga continue to be two of the top 10 grossing games on iOS and Android app stores (U.S.). In 2017, King contributed majorly to the company’s in-game net bookings. Additionally, the release of latest Candy Crush Friends Saga is a key catalyst. The unit, however, is not standing still. It will actively invest in other games internally and through partnerships, lowering risks of launching new titles and cutting development costs.

·         Activision Blizzard has long been eyeing the lucrative e-sports market. E-sports refer to live video game tournaments. With continued increases in viewership, corporate sponsorships and growing media coverage, e-sports is here to stay. Per latest report from Newzoo, e-sports industry will reach $1.4 billion by 2020.  To grab a share of this lucrative opportunity, Activision formed an exclusive e-sports unit spearheaded by former ESPN CEO Steve Bornstein.

·         Activision has already established Call of Duty World League. The company reported Overwatch League to have drawn more than 10 million viewers in the opening week. The company announced a two-year deal with Twitch, under which the social video service provider will stream every match of the world’s first global city-based e-sports league. Moreover, Activision onboarded two new teams from U.S. and China for its 2019 Overwatch League season.

·         Activision Blizzard’s stock has done well in recent years because of the consistent success of its major games. Call of Duty can continue to generate more revenue for the company for several quarters, as early data indicates that players will be interested in the game for a longer time, compared with previous versions.

EARNINGS

Activision Blizzard reported third-quarter 2018 non-GAAP earnings of 42 cents per share. Earnings declined 5% from the prior-year quarter.

Net revenues (including deferrals) declined 6.6% year over year to $1.51 billion. 

The Consensus Estimate for earnings and revenues was pegged at 51 cents and $1.69 billion, respectively.

BALANCE SHEET

As of Sep 30, 2018, Activision had $3.31 billion in cash and cash equivalents compared with $4.86 billion as of Jun 30, 2018. Activision exited the quarter with long-term debt of $2.67 billion. Operating cash flow for the quarter was $253 million.

Disclaimer:

Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.

Vtrade Proposes to BUY NVIDIA Corporation (NASDAQ: NVDA)

NVIDIA Corporation

NASDAQ: NVDA

COMPANY DESCRIPTION

Founded in –1993 | Current Market Cap – 88.45 Billion USD

NVIDIA Corporation operates as a visual computing company worldwide. It operates through two segments, GPU and Tegra Processor. The GPU segment offers processors, which include GeForce for PC gaming and mainstream PCs. GeForce NOW for cloud-based game-streaming service. Quadro for design professionals working in computer-aided design, video editing, special effects, and other creative applications; Tesla for AI utilizing deep learning, accelerated computing, and general-purpose computing; GRID provides power of NVIDIA graphics through the cloud and datacenters. DGX for AI scientists, researchers, and developers and cryptocurrency-specific graphics processing units. The Tegra Processor segment provides processors designed to enable branded platforms - DRIVE and SHIELD. DRIVE automotive computers and software stacks, which offer self-driving capabilities. SHIELD devices and services designed for mobile-cloud in home entertainment. NVIDIA is headquartered in Santa Clara, California.

RECOMMENDATION

We rate NVIDIA Corporation a Buy at USD 145 for a target of USD 193 in three month.

Below are the basic reasons to recommend this stock as a Buy.

·         NVIDIA is gaining market share among gaming service providers, which is strengthening its position in workstation-based gaming services in supercomputing segments. The strong lineup of advanced graphics cards has made it a favorite graphics card provider among PC makers. The company has always generated substantial revenues from its cards because of the significantly higher functionality. Recently, NVIDIA  began shipping its first gaming GPUs — GeForce RTX series — based on Turing architecture. Management believes that RTX is well-poised to establish itself “as a game-changing architecture”, given the pipeline of upcoming games supporting the ray-tracing feature.

·         Although gaming is the key to NVIDIA’s growth, computing is becoming increasingly more visual, given the new-age tablets that are seeing tremendous demand. According to NVIDIA, its High-Performance Computing (HPC) and data centers are expected to witness tremendous growth over the long run period. The company has last year introduced a new HPC technology, Tesla P100 GPU Accelerator, which NVIDIA claims will provide higher efficiency and performance to enterprises while incurring 70% lower capital and operational costs. It has also introduced Tesla M10 GPU which allows enterprises to connect to 64 users per board or up to 128 users per server with just two boards. This will help organizations in lowering their per user cost. Continuous product launches in the computing segment is positive for a company like NVIDIA, which is witnessing increased demand for its graphics chips.

·         NVIDIA benefits from the continuous launch of new products. In Consumer Electronics Show (CES) 2018, NVIDIA introduced a hardware “big format gaming displays, or BFGDs” in collaboration with HP Inc., Asus and Acer, to heighten gaming experience on a big screen — 65 inches. NVIDIA unveiled its Turing architecture, which includes real-time ray tracing technology, RT Cores as well as Tensor Cores for AI inferencing. We believe the product launch will help NVIDIA expand its customer base and in turn drive additional revenues. Moreover, continuous ramp up of new products is helping it gain competitive advantage against the likes of AMD and Intel and expand market share. The recent launch of open-source GPU-acceleration platform, RAPIDS, which is designed to enable companies to analyze a huge amount of data at unparalleled speed and make business decisions efficiently, is expected to be a key driver.

·         NVIDIA is gaining from strategic partnerships. The company is engaged with several organizations, which include leading cloud server companies like Amazon, Baidu, and Facebook, who are infusing AI in various applications. The company has also partnered with industry leaders such as IBM, Microsoft and SAP in order to bring AI to enterprise users. Moreover, NVIDIA, to fortify its foothold further in the AI space, has recently partnered with Arrow for an AI computing platform, Jetson Xavier, to deliver advanced AI computing. Moreover, recently Oracle chose to support NVIDIA HGX-2 platform on its Cloud Infrastructure to address growing demand for AI and machine learning across various industries. The company is also getting into collaborations in healthcare and manufacturing, among others, to accelerate the adoption of AI.

·         NVIDIA’s foray into the autonomous vehicles and other automotive electronics space has been driving its stock higher since mid-2015. In 2016, NVIDIA launched DRIVE PX 2 – the world’s most powerful engine for in-vehicle AI and later in the year unveiled an AI supercomputer chip designed for self-driving cars called Xavier. In 2017, it launched another chip called Pegasus that helps to drive fully autonomous robotaxis. Notably, the company is working with more than 320 automakers, tier-one suppliers, automotive research institutions, HD mapping companies and startups to develop and deploy AI systems for self-driving vehicles. Recently, it partnered with German car maker Daimler and Bosch for a self-driving car that will begin testing within a year. With sustained focus on developing new and more advanced AI technologies for self-driving cars, we believe that the company is well poised to grow in the driverless vehicle technology space.

·         NVIDIA’s focus on GRID platforms is increasing GPU adoption in data centers, giving it an advantage against its competitors. NVIDIA GRID is a powerful GPU-based platform that supports corporate virtualized desktops in data centers, cloud gaming services and design software-as-a-service. GRID provides a visually rewarding graphics experience that a company may otherwise derive from an expensive, dedicated PC. NVIDIA and VMware had entered a strategic alliance to run NVIDIA GRID technology on VMware Horizon Desktop-as-a-Service (DaaS) Platform. This will help NVIDIA to enrich its virtualization, automation and cloud-based portfolios. We believe that NVIDIA’s revenues will stand to benefit significantly if the latest GameWorks technologies succeed in meeting user requirements. We believe that NVIDIA’s GRID enterprise virtual graphics, which improve the visual effects of games, will help in future revenue and margin growth.

EARNINGS

NVIDIA third-quarter fiscal 2019 results recorded a year-over-year improvement but fell short of the Consensus Estimate.

The company’s non-GAAP earnings per share came in at $1.84, surging 38% from the year-ago period while declining 5% sequentially. Also, the bottom-line figure missed the Consensus Estimate of $1.91.

Revenues improved 21% year over year to $3.18 billion. However, the top line lagged the Consensus Estimate of $3.24 billion. Moreover, it was lower than the management’s projection of $3.25 billion (+/-2%). Although growth across Data center, Professional Visualization and Automotive segments was positive, weakness in the Gaming segment was a spoiler.

Moreover, due to excess inventory of mid-range Pascal products caused by low demand from cryptocurrency induced the management to issue a soft guidance for the fiscal fourth quarter.

BALANCE SHEET

NVIDIA exited the fiscal third quarter with cash, cash equivalents and marketable securities of $7.59 billion compared with $7.94 billion in the previous quarter. NVIDIA’s long-term debt remained at $1.99 billion.

Cash flow from operations was $487 million compared with $913 million in the prior quarter. Free cash flow during the fiscal third quarter came in at $337 million, down from $785 million in the fiscal second quarter.

During the first nine months of fiscal 2019, the company returned approximately $1.13 billion in the form of share repurchases ($855 million) and dividend payouts ($273 million) to shareholders. NVIDIA extended its dividend and share buyback program and announced its plans to return an additional $3 billion to shareholders by the end of fiscal 2020.

Disclaimer:

Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.

Vtrade Proposes to BUY BeiGene Ltd (NASDAQ: BGNE)

BeiGene Ltd

NASDAQ: BGNE

COMPANY DESCRIPTION

Founded in –2010 | Current Market Cap – 13.22 Billion USD

BeiGene, Ltd. develops and commercializes molecularly-targeted and immuno-oncology drugs for the treatment of cancer. Its commercial products include ABRAXANE, a chemotherapy product for the treatment of breast, non-small cell lung, pancreatic, and gastric cancer; REVLIMID, an oral immunomodulatory drug for the treatment of multiple myeloma in combination with dexamethasone; and VIDAZA, a pyrimidine nucleoside analog for the treatment of intermediate-2 and myelodysplastic syndromes, chronic myelomonocyte leukemia, and acute myeloid leukemia with 20% to 30% blasts and multi-lineage dysplasia. The company’s clinical stage drug candidates include BGB-3111, a small molecule Bruton’s tyrosine kinase (BTK) inhibitor for the treatment of lymphomas; BGB-A317, a humanized monoclonal antibody for solid and hematological cancers; BGB-290, a small molecule inhibitor of PARP1 and PARP2 for the treatment of homologous recombination deficient cancers. BeiGene, Ltd. is based in George Town, the Cayman Islands.

RECOMMENDATION

We rate BeiGene Ltd. a buy at USD 105 for a target of USD 162 in four months. 

Below are the basic reasons to recommend this stock as a Buy.

·     The company initiated a global phase three trial comparing BGB-311 to ibrutinib in patients with Wald Enstrom’s Macroglobulinemia, as well as a pivotal program in China to treat patients with relapsed/refractory mantle cell lymphoma and relapsed/refractory chronic lymphocytic leukemia/small lymphocytic lymphoma.

·    The company initiates phase 1 anti-PD-1 antibody BGB-A317 in combination with their PARP inhibitor BGB-290 in patients with solid tumors. Preliminary data was encouraging, with patients demonstrating signs of anti-tumor activity and the drug combo was generally well-tolerated. BeiGene is looking forward to seeing activity in expansion cohorts (triple negative breast cancer, ovarian cancer, castration-resistant prostate cancer, pancreatic cancer, and others).

·    In mid-June updated phase 1 data on their BTK inhibitor BGB-3111 in patients with chronic lymphocytic leukemia (CLL) and small lymphocytic lymphoma (SLL) was presented in Switzerland. The drug appeared to be well tolerated, with overall response rate of 94% quite promising and a very low discontinuation rate of 3%, which is a very good progress. Keep in mind that management believes BGB-3111 potentially has best-in-class attributes, while initial efficacy of the asset in combination with obinutuzumab supports accelerated development in a broader FL population.

·     The company is building its own commercial biologics manufacturing facility in Guangzhou, Guangdong Province, China as part of a joint venture with Guangzhou Development District to support research and development efforts in China.

·     The company has two other clinical-stage assets, BGB-290 and BGB-283. BGB-290 is an orally available inhibitor of PARP1 and PARP2 enzymes, which are involved in tumor growth. Olaparib (Lynparza) is currently the only FDA-approved PARP inhibitor. The company claims BGB-290 may be more selective and has significant brain penetration compared to olaparib, which is another factor that may drive the company ahead.

·     The company collaborates with Merck KGaA worldwide (outside of China) to develop and commercialize the asset. The deal is worth about $100mn in milestone payments, plus royalties.

EARNINGS

BeiGene Q3 GAAP EPADS of -$2.53 beats by $0.49. Revenue of $54.2M (-75.4% Y/Y) beats by $7.14M.

Revenue for the three months ended September 30, 2018 was $54.20 million, compared to $220.21 million in the same period in 2017. The decrease is primarily attributable to the upfront payment recognized in the prior year period under our collaboration agreement with Celgene for tislelizumab.

Disclaimer:

Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.

Vtrade Proposes to BUY Amazon.com (NASDAQ: AMZN)

Amazon.com, Inc.

NASDAQ: AMZN

COMPANY DESCRIPTION

Founded in –1994 | Current Market Cap – 794.09 Billion USD

Amazon.com, Inc. engages in the provision of online retail shopping services. It operates through the following segments: North America, International, and Amazon Web Services (AWS). The North America segment includes retail sales of consumer products and subscriptions through North America-focused websites such as www.amazon.com and www.amazon.ca. The International segment offers retail sales of consumer products and subscriptions through internationally-focused websites. The Amazon Web Services segment involves in the global sales of compute, storage, database, and AWS service offerings for start-ups, enterprises, government agencies, and academic institutions. The company was founded by Jeffrey P. Bezos in July 1994 and is headquartered in Seattle, WA. Number of employees are 566 000 people.

RECOMMENDATION

We rate Amazon.com, Inc a Buy at USD 1590 for a target of USD 1800 in one month.

Below are the basic reasons to recommend this stock as a Buy. 

·       Amazon.com is one of the largest e-commerce companies in the world. Although the primary product line was books at first, the company rapidly diversified into a host of other product categories. The current focus is on building video content, primarily for Prime subscribers because the growth prospects in that market are considerable. Product selection, a superior user experience, bargains and customer feedback have helped the company build a strong position for itself in the fast-growing ecommerce market. The growth of the e-commerce industry with consumers increasingly buying things online has proved to be favorable for the company. While the big brands may build their own online stores over time, a platform like Amazon allows discovery by new buyers. Smaller players are far more dependent on Amazon as they don’t have the resources that Amazon has to invest in technology and fulfilment to generate the kind of reach that Amazon can deliver. Moreover, considering opportunities in international markets, the company’s high growth rates are likely to be sustained over the next few years.

·       Amazon keeps its retail business very hard to beat on price, choice, and convenience with the help of a solid loyalty system in Prime and its FBA strategy. The company continues to push advantages exclusively to Prime members, thus encouraging them to spend more on Amazon. The current focus is on building video content, primarily for Prime subscribers because the growth prospects in the market are considerable. Prime members are much more loyal and spend double the amount spent by non-Prime members.

·       Amazon’s strategy of gradually merging online and offline retail looks promising. It will not only reshape the retail landscape but also help it fend off competition, if it could manage a first mover advantage. It has added online and offline features to its bookstores and is going the same way with innovations such as drive-in-grocery delivery service (AmazonFresh Pickup - order groceries online and collect them from a store nearby) and “cashier-less” stores (Amazon Go – the company’s first brick-and mortar grocery store). We expect online retail sales to decelerate while the overall retail market still holds a lot of potential. So, moves like these will help Amazon tap many customers who prefer to shop offline, while not doing away with the online business.

·       Amazon is the leading provider of cloud infrastructure as a service to enterprise customers. The expanding customer base of Amazon Web Services (AWS) driven by its strengthening cloud offerings will continue to aid Amazon's dominance in the global cloud space. Even more encouraging is the fact that AWS generates much stronger margins than the traditional retail business, which should remain a positive for the company’s profitability as it continues to grow in the mix. AWS is gaining momentum with customers including Adobe, GE Oil & Gas, Kellogg’s, Airbnb, Hilips, Pinterest, Spotify, Tata Motors, Unilever, McDonalds, BMW, British Gas, Capital One, US Department of State and USDA Food and Nutrition Service.

·       Amazon is pushing well with its device’s strategy. Alexa powered Echo devices are going great guns and help the company sell products and services. Artificial intelligence (AI) driven Alexa has already been integrated into a host of everyday devices for the digital home, which has converted the nascent smart home market into a potential area of growth in a very short time. Currently, Alexa is equipped with more than 25,000 of skills and can connect to any stream of business. It’s an important method of collecting householder information, since Alexa is used to listen to commands and store everything that it hears in the cloud the company is racing to build an ecosystem around Alexa and it’s safe to say that it has taken an early lead over Google's smart assistant and Microsoft's Cortana.

·       Amazon is gradually choosing the buy option over build, which, along with the other positives, ensures that the company generates revenues right way without wasting any time in building its own infrastructure. In Jul 2017, the company completed the acquisition of a Dubai-based e-commerce giant, Souq.com. The deal will help Amazon to establish a presence in countries like Egypt, Saudi Arabia, and the UAE markets like Egypt, Saudi Arabia, and the UAE. Amazon’s retail market share is still relatively small in these markets, but there is a good possibility of an increase in the next few years. If this happens, the company will see additional several billion dollars a year in revenues. In August, the company closed acquisition of natural and organic foods supermarket, Whole Foods Market for $13.7 billion. Through this acquisition, the company is targeting the considerably large customer base that still prefers to shop at physical stores. This is Amazon’s way of tackling mounting competition and slow growth in the e-commerce space. This year, Amazon has also acquired Body Labs, a startup that develops AI, computer vision and body-modelling based 3D body shapes and motion for various industries. It also acquired GameSparks to spruce up its gaming capabilities.

·       The International segment balances out the domestic business. It has been generating double-digit year-over-year growth right through the recession and thereafter. Amazon has been introducing several new products for international markets that are expected to drive demand. It is also building fulfillment centers to cater to the increase in demand. The company has been expanding Prime internationally to strengthen its foothold in international markets and create a launch pad for its other business. We expect the growing international market to continue to drive sales over the long term, as opportunities abound.

·       Amazon has accelerated its push in the logistics business. The company is reportedly working on a new delivery service called “Seller Flex”, where it itself will pick up packages from third-party merchant warehouses and deliver them to customers, a function currently handled by its long-time partners United Parcel Service and FedEx. The company is increasing its own control and reducing reliance on courier partners and third-party merchants in the process of delivering products. Earlier the company announced that it will build its first air cargo hub at Cincinnati/Northern Kentucky International Airport. Moves like these underscore Amazon’s accelerated push toward building its own in-house shipping and logistics service to support the complex network of fulfillment, logistics and delivery systems that it has been building. Amazon has been investing heavily in fulfillment centers, trucks and containers and its Fulfillment by Amazon (FBA) service has been doing well. It has bought some planes and has self-designed drones in the works.

·       Amazon.com generates strong cash flows. The nature of the retail business does not leave too much room for differentiation, so price competition is intense. However, despite the seasonality in its business and the resultant fluctuation in gross margins, operating margins do not move around that much. This is because of a relatively flexible operating cost structure, which allows the company to curtail technology and content expenses when margins are impacted by discounts and promotions to boost sales during the holiday season. Given these factors, revenue growth and the expansion of business are the primary drivers of cash flows. However, management has been investing in the business aggressively mostly transferring gross profit gains into fulfillment, technology, content and acquisitions. We consider these investments essential in driving the next growth phase. Moreover, these investments have increased automation in the fulfillment centers and led to huge volumes of quality content, which along with strong growth in third party units are positives for gross margins. The increased investment on the AWS side, despite being a drag on profits initially, has paid off big time.

EARNINGS

Amazon reported third-quarter 2018 earnings of $5.75 per share, crushing the Consensus Estimate by $2.46 (74.8%). The company had reported earnings of 52 cents in the year-ago quarter.

Further, net sales of $56.58 billion missed the Consensus Estimate of $57.07 billion. However, the figure surged 29.3% year over year and was within management’s guided range of $54-$57.5 billion.

North America revenues (60.7% of sales) jumped 34.9% from the year-ago quarter to $34.35 billion. International revenues (27.5% of sales) increased 13.4% to $15.55 billion.

Disclaimer:

Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.