Despite missing on profit, Amazon exceeded the expectations of various analysts like Wall Street in Q3 2020. Moreover, the Amazon Web Services (AWS) revenue and other revenues as well exceeded analysts forecast levels. The Earnings Per Share (EPS) also shoot up due to enormous growth in revenue as compared to the previous year Q3 (Baird, 2017). The company has experienced a surge in both cloud services and e-commerce amid the covid-19 pandemic. Demand for cloud services has escalated due to the work at the home policy that has led to the economy ballooning in size. This as result has led to the emphasis on online shopping as many consumers are sheltering at their homes. Thus, Amazon earned tremendously beyond analysts’ expectations as it had established itself better in online retail shopping.
However, Amazon has been reporting missed profits. This is due to the shipping costs and higher costs. According to Amazon CEO and Founder, Jeff Bezos, the company has been concentrating on sales where the two-day shipping was reduced to one-day shipping. This has seen the company experience a growth in sales by 35% but this has lagged behind what Microsoft saw in the same period which mounted to 60%. In addition, according to CFO Brian Olsavsky, the firm is still enjoying being both at the top line as well as bottom-line where it has invested more in new products and handling a wide group of clients.
Any given company which Earnings Per Share have increased by 25% as compared to the previous year same quarter indicates that the firm is experiencing strong demand for both products and services. One of the ways of boosting Eps is through pursuing actions that make the net income shoot. Also, through repurchasing of stock shares, EPS gets boosted (Gao, 2020). This result in minimizing shares possessed by the shareholders. Therefore, as a financial manager, I would embrace these strategies to make sure profits and EPS has shot in the fourth quarter.
Baird, P. (2017). Value line quarterly EPS forecast error: Analyst credibility or management appeasement?. Financial Services Review, 26(1).
Gao, L. (2020). Technology Advancements for Whistleblowing Reporting Platforms and Employees’ Decision to Blow the Whistle. Accounting and the Public Interest.Order Now