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Amazon Storms Past Earnings Views, And Buy Point, On Cloud Gains

Amazon ( AMZN ) reported its highest sales growth in nearly four years Thursday, while continued robust gains at its cloud-computing unit and merchandise operations also point to a strong current quarter. The e-commerce powerhouse swung to a first-quarter profit of $1.07 a share, which crushed the consensus earnings estimate of 58 cents, and swinging from a loss of 12 cents a share a year earlier. Revenue jumped 28% to $29.1 billion, ahead of the $28 billion view. Amazon sees total Q2 revenue of between $28 billion and $30.5 billion, largely above Wall Street forecasts of $28.3 billion. That would be a 26% gain at the midpoint. Shares jumped more than 12% in late trading, positioning the stock to blast back through its buy point of 603.34 when trading begins Friday. Amazon closed down 0.75% to 602 on Thursday. The earnings beat is likely due to businesses buried within Amazon, such as its cloud computing division, ChannelAdvisor Executive Chairman Scot Wingo told IBD, adding that its third-party marketplace had a significant effect on Q1 profits too. Amazon Web Services (AWS), the company’s cloud-computing division, saw revenue soar 64% to $2.57 billion. AWS was expected to post $2.54 billion in sales, according to FactSet. AWS has been closely watched by investors since the company began reporting its sales separately. “Once again, Amazon Web Services exhibited significant growth, with revenues up $1 billion. However, the more impressive metric is margin, which roughly doubled to 23.5%, generating over $600 million, or roughly 60%, of Amazon’s total operating income,” Moody’s analyst Charlie O’Shea said in an email. Though AWS is a runaway leader in cloud computing, Alphabet ( GOOGL ), through its Google division, and Microsoft ( MSFT ) are mounting fierce competition. In its earnings release last week, Microsoft said its annualized run-rate for the cloud is over $10 billion. Meanwhile, Amazon’s electronics and general merchandise category was also strong, Wingo said. “In North America it grew 32%, and 33% internationally — it’s an acceleration over the holiday period, which is amazing.” Amazon’s Prime Now one-hour delivery service may have accounted for the acceleration, or at least part of it, Wingo said. With its latest expansion into Tampa, Fla., Prime Now covers 42% of the U.S. Amazon has called its expedited shipping options “difficult and expensive” but has said shoppers love them. In previous quarters, shipping costs have weighed on earnings, but Q1 growth in total expenses lagged topline gains: 25% vs. 28%. Free cash flow minus principal repayments increased to $3.5 billion from $1.5 billion in the year-earlier quarter. Free cash flow can be useful to determine whether Amazon sales are growing fast enough to cover the big bets CEO Jeff Bezos makes on things such as data centers, fulfillment centers and new product lines. Working together, the Prime loyalty program, third-party market and Fulfillment By Amazon have created flywheels that further drive profits. “Amazon is taking share from everybody at this point,” Wingo said. E-commerce as a sector is growing at about 15%, while brick-and-mortar retail grow by between 2% and 3%, he estimated. Amazon rival eBay ( EBAY ) posted 5% growth, but only 3% came from the marketplace. Bezos also touted the company’s hardware offerings, such as the Fire TV Stick, Fire Tablets and Echo, but Wingo said that at this point, the sales for the family of Echo products are not significantly boosting electronics and general merchandise sales. “We’re building premium products at non-premium prices, and we’re thrilled so many customers are responding to our approach,” Bezos said in a press release. OK

LinkedIn Shatters Q1 Earnings, Stock Rallies In After-Hours Trading

Deep amid a business transition, LinkedIn ( LNKD ) late Thursday reported first-quarter earnings and sales that beat Wall Street consensus expectations, as did its Q2 earnings and sales guidance. LinkedIn stock at first jumped 15% in after-hours trading, after the earnings release, but later was up 8%. In the regular session, LinkedIn stock rose 3.5%, to 123.01. Fellow social network Facebook ( FB ) rose 7.2% Thursday after that company late Wednesday posted Q1 results and gave guidance that beat analyst views. Thursday’s reaction is in marked contrast to three months ago, when LinkedIn posted a Q4 beat but gave guidance that fell well short of expectations, sending shares plummeting 44% the next day, to 108. Shares have been slowly recovering. LinkedIn reported Q1 revenue of $860.7 million, up 35% year over year and beating the consensus of $828.5 million. It reported earnings per share minus items of 74 cents, up 30% and beating the consensus of 60 cents, as polled by Thomson Reuters. For Q2, LinkedIn sees sales of $885 million to $890 million, up 25% at the midpoint and above the $886 million analysts had modeled. The company expects EPS ex items of 74 cents to 77 cents, up at least 35% from 55 cents in Q2 2015 and above the 71 cents analysts had modeled. LinkedIn provided full-year sales guidance of $3.65 billion to $3.7 billion, with the midpoint in line with analyst consensus of $3.67 billion. Non-GAAP EPS is expected to be between $3.30 and $3.40, above the consensus of $3.19. LinkedIn, which provides most of its services to members at no cost, generates revenue from three business segments. Revenue from Talent Solutions, which gets fees from companies and headhunters seeking hires, rose 41% year-over-year to $558 million. Revenue from Marketing Solutions, which sells ads, increased 29% to $154 million. Revenue from Premium Subscriptions increased 22% to $149 million. LinkedIn said it ended the quarter with 433 million members, up 19% and its strongest net additions since the beginning of 2014, the company said. Unique visiting members rose 9% to an average of 106 million members a month, and member page views grew 34%. Page views per unique visiting member hit an all-time high in Q1, with 23% year-over-year growth, LinkedIn said. “Q1 marked the first full quarter for our new mobile flagship experience, and we are pleased with the performance thus far,” said CEO Jeff Weiner in the company’s earnings conference call. “Members are engaging at record levels with the more relevant and comprehensive feed.” The weak Q1 guidance three months ago caused analysts to slash their estimates, partly on an apparent deceleration of the Talent Solutions segment. At the time, LinkedIn said a reshuffling of product strategy would impact short-term revenue growth in favor of the long term. Then, the company also said it would shutter a business called Lead Accelerator. That decision cut the company’s 2016 revenue forecast by $50 million. The Lead Accelerator business had been created out of LinkedIn’s $175 million acquisition of Bizo in July 2014. The technology focuses on boosting the ability of marketers to target prospects and had been considered a high-growth opportunity. LinkedIn said the manpower needed to boost Lead Accelerator was not worth the time and effort, and that it was “a higher-than-anticipated demand on resources.” The move did not go over well with analysts, with one calling it a “gigantic mistake.” But that move along with other strategy shifts have set the stage for future growth, Weiner said. He said LinkedIn strengthened its core Recruiter product while also laying the groundwork for the rollout of a number of emerging growth drivers. Its Recruiter platform, within the Talent Solutions group, “is the foundation of our long-term growth strategy,” Weiner said, adding that recruiters are experiencing “greater success” with the new product. The company said hiring revenue contributed$502 million in revenue in Q1, up 27% from Q1 2015.

Amgen Legacy Drugs Drive Q1 Beat; Gilead Hep C Juggernaut Stumbles

Big biotech Amgen ( AMGN ) beat Wall Street’s Q1 estimates and raised guidance Thursday after the close, though its stock went sideways in after-hours trading. Its peer Gilead Sciences ( GILD ), however, was down sharply after a weak quarter. Amgen reported adjusted earnings of $2.90 a share, up 17% from the year-earlier quarter and 30 cents ahead of analysts’ consensus, according to Thomson Reuters. Revenue increased 10% to $5.53 billion, more than $200 million above consensus. The company lifted its full-year guidance, though not by quite as much as the Q1 beat. Its EPS range is now $10.85 to $11.20, up from $10.60 to $11. The revenue guide is $22.2 billion to $22.6 billion, vs. $22 billion to $22.5 billion. Last year, Amgen made $10.38 in EPS on $21.66 billion in revenue. Amgen’s best-selling drug Enbrel, for rheumatoid arthritis, beat expectations by growing 24% to $1.39 billion, almost $140 million above consensus, according to Evercore ISI. Its second-biggest drug Neulasta, for neutropenia, modestly beat estimates by gaining 4% to $1.18 billion. On the other hand, some of Amgen’s newer drugs came up short. Cancer drug Kyprolis grew 43% but was still $19 million shy of consensus with $154 million in sales, while newly launched cholesterol drug Repatha continued its underperformance with a $16 million take. Gilead Takes A Hit In Hep C Gilead, meanwhile, reported earnings of $3.03 a share excluding one-time items, up 3% from last year’s Q1 and 12 cents below Wall Street’s average estimate. Revenue rose 2.6% to $7.79 billion, about $325 million below consensus. Gilead nonetheless made no change to its full-year guidance, calling for $30 billion to $31 billion in product sales and 88% to 90% gross margin. Gilead’s blockbuster hepatitis C drugs Harvoni and Sovaldi accounted for most of the shortfall, though for opposite reasons: Harvoni missed badly in the U.S. but outperformed abroad, while Sovaldi did the opposite. Earlier in the day, AbbVie ( ABBV ) reported that Harvoni’s chief competitor Viekira also came up short of consensus, which the company attributed to Merck ‘s ( MRK ) unexpectedly aggressive pricing of recently launched rival Zepatier. (Merck will report its Q1 on May 5.) The quarter also brought a screeching halt to Gilead’s two-year stretch of double- or triple-digit sales and profit growth, starting with the Dec. 2013 launch of Sovaldi. Analysts expect growth will totally flatten unless the company makes a transformative acquisition. Gilead stock was down more than 6% after hours Thursday, after it closed the regular session down 3.7%, at 97.