Amazon stock price took a substantial 11 percent jump after the retail giant announced an unexpected third quarter profit. This comes as a good surprise for shareholders and analyst who were anticipating a loss in the recent quarter.
In a related Inquisitr report, another big online company experienced a recent upswing in stock price. After lagging for the past several months, Twitter stock price also recently increased after the announcement of the return of Jack Dorsey as CEO of Twitter.
In a Seattle Times report, there were several financial factors that contributed to the Amazon stock price increase. For starters, the company posted a total profit of $79 million, which translates to 17 cents a share.
Amazon Web Services, the cloud computing division, was largely responsible for the stock price gain and boosted the online retailer’s bottom line much of the year. AWS revenue increased 78 percent to $2.1 billion and profited $521 million in the third quarter alone.
AWS, which accounts for about 8 percent of Amazon’s total revenue, is strategic to the growth of the company. Jason Moser, analyst with The Motley Fool, recently commented about how this division is a moneymaking machine for the online giant.
“Amazon Web Services is really proving to be a major driver for the bottom line. Their pricing strategy (constantly lowering them for AWS) has been extremely effective in helping them pick up market share while allowing them to build the services their customers want and need.”
Amazon’s stock price also benefited from profits gained through advertising sales and the Marketplace division. Additionally, the one-day worldwide sale to celebrate Amazon’s 20th anniversary in July known as Prime Day was a huge win-fall for the company. In one day, Amazon added 2 percent or $460 million to the company’s revenue growth for the quarter.
Overall the Amazon stock price gain was due to the higher-than-expected revenue generated by the company. Net sales went up 23 percent to $25.36 billion, while most experts thought Amazon would lose 13 cents a share on sales of $24.91 billion.
Amazon posted only $20.6 billion during the same period last year.
According to Business Insider, Amazon is looking for other ways to increase margin. The retail giant wants to cut out third-party shippers like UPS and FedEx and launch its own shipping network “sometime in 2016.”
A report from an unnamed source stated that Amazon is currently seeking management executives with small-package industry experience. The report went on to say that Amazon plans to guarantee package delivery within two hours.
Having its own in-house shipping unit could be a good idea for Amazon. Ideally, it would give them more cost control as well as the ability to offer improved product availability with higher levels of service.
A Baird Equity Research report commented on Amazon’s ability to launch such a transportation and shipping network. “Amazon has ‘powerhouse potential’ in the large transportation and logistics market, dominated by global enterprises such as DHL and UPS,” the report noted.
The idea is already being tested by the online juggernaut. Promising one-hour delivery, Amazon’s Prime Now service is already offered in select cities worldwide.
It would seem Amazon is paying attention to the math and calculating how much they can save by cutting out UPS and FedEx altogether, especially in Prime Now locations. Amazon certainly has the money, facilities, and manpower to start such an operation.
Currently the company has 123 global warehouses, 23 package sorting facilities, and employs 222,400 employees. Amazon also uses 30,000 robots at 13 of its warehouses.
Due to the increase in Amazon stock price, Jeff Bezos, the company’s founder and CEO, became the third richest man in the U.S. behind Bill Gates and Warren Buffet. This puts Bezos’ net worth at an estimated $55 billion.
As the holiday season approaches, Amazon stock price is poised for continued growth. Financial experts are expecting profit and sales to continue to climb in the fourth quarter. Amazon is currently predicting fourth quarter operating income between $80 million and $1.28 billion, while net sales should increase 14 to 25 percent or $33.5 billion to $36.75 billion.
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