Should Investors Buy Amazon After Its Post-Earnings Plunge?

From Nasdaq: 2024-08-08 04:20:00

E-commerce and tech giant Amazon reported mixed second-quarter earnings with some results exceeding Wall Street’s expectations. However, the news dropped during a two-day sell-off, causing shares to plummet over 15%. Despite this, analysts believe it’s a table-pounding buy due to three reasons: 1. AWS’ momentum is better than expected, 2. Amazon is gushing cash flow, and 3. Shares are a bargain after the recent drop.

Amazon’s cloud revenue growth rate accelerated to 18.8% in Q2, outperforming analyst expectations of 17.6%. With a multibillion-dollar AI revenue run rate, Amazon is investing in custom in-house AI chips to meet customer demands and stay competitive in the market, positioning the company well in the growing global cloud computing opportunity.

Amazon’s cash profits and free cash flow have hit all-time highs, showcasing strong financial performance. Despite a slightly lower revenue guidance for the next quarter, Amazon’s cash-flow explosion makes the stock a bargain. Comparing cash flow to stock price, Amazon is trading at a decade-low valuation, presenting a strong investment opportunity for long-term investors.

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