Amazon.com, Inc.

Expansion in Illinois with Channahon Fulfillment Center: Amazon.com, Inc. (NASDAQ: AMZN) is an e-commerce giant, covering a vast range of industries from logistics to pharmaceuticals. The company announced that it is planning to open a fulfillment center in Illinois, creating more than 500 jobs where employees will pick, pack and ship large customer items at $15 per hour in addition to other comprehensive benefits like full medical, vision, and dental insurance, etc. The company has also vowed to invest over $700 million to provide upskilling training for 100,000 U.S. employees.

AWS as its Preferred Cloud Provider:The Company announced that it will hold a conference call to discuss the financial results of Q3FY19 on October 24, 2019. Amazon Web Services, Inc.announced that Old Mutual Limited has selected AWS as its preferred cloud provider. It would transfer its digital customer platforms, core insurance applications, and product administration systems to the cloud, migrating about 1,000 applications to AWS, resulting in shutting down of data centers by 2022. Old Mutual is building a data lake on AWS, which will offer a single, consistent view of a customer’s information across the entire business.

Outlook: According to the financial guidance of the company, sales for Q3FY19 are likely to range between $66.0 billion and $70.0 billion or to ascend between 17% and 24% as compared to the third quarter of 2018, incorporating the negative foreign exchange impact of about 30 basis points. The company also anticipated that there would be a fall in operating income and is expected to range between $2.1 billion and $3.1 billion as compared with $3.7 billion in the third quarter of 2018.


Net Sales (Source: Company Reports)
 
Stock Recommendation: Q2FY19 witnessed a respectable growth of 140% yoy in free cash flows of $25,018 million. The company posted a growth of 21% in top-line (excluding the $814 million unfavorable impact from yoy changes in foreign exchange rates) during the second quarter of FY19. Gross margin of the Company for June 2019 came in at 42.7%, lower than the industry median of 58.2%. Net profit margin and EBITDA margin declined in the quarter ending June 2019 from 6% and 7.7% to 4.2% and 5.2%, respectively. The stock is trading at a price to earnings multiple of 72.93x. Considering its position in the respective industry and continuous measures to maintain it, a decent set of numbers for Q2FY19, and other factors, we recommend a “Hold” rating on the stock at the current market price of $1,757.51, down 1.68% as on 18 October 2019.
 

Microsoft Corporation

A Collaboration of Microsoft and Novartis: Microsoft Corporation (NASDAQ: MSFT) is an American multinational Company which enables digital transformation and offers global cloud services from local data centers to accelerate digital transformation across start-ups, businesses, and government agencies.Novartis announced that it has selected Microsoft as its strategic AI (artificial intelligence) and data-science partner and have committed to a multi-year research and development effort, which will focus on AI Empowerment and Exploration. Both companies will also develop and apply next-generation AI platforms and processes that support future programs across these two focus areas.

Microsoft and ENGIE Announced Innovative Renewable Initiatives: Microsoft and ENGIE announced a long-term solar and wind energy power purchase agreement (PPA) which provides 24/7 supply in the U.S. and implementation of Darwin, an energy software which uses the intelligent cloud services of Microsoft Azure to optimize the performance of ENGIE’s wind, solar, and hybrid renewable assets worldwide.
A Collaboration among Schlumberger, Chevron, and Microsoft: Schlumberger, Chevron and Microsoft announced the three-party collaboration to accelerate the creation of innovative Petrotechnical and digital technologies. The three companies will work together to build Azure-native applications in the DELFI cognitive E&P environment initially for Chevron, which will enable the companies to process, visualize, interpret and obtain meaningful insights from multiple data sources.

Record Breaking Performance in FY19: During FY19, the company delivered revenue of more than $125 billion, operating income of approximately $43 billion and more than $50 billion in operating cash flow and returned more than $30 billion to shareholders.

Financial Performance (Source: Company Reports)

Outlook:The company will continue to develop intelligent solutions for customers that encourage users to be creative with simplifying IT Management and it is transforming workplace to deliver modern business applications, which will help to improve on how people will communicate and interact with one another. The company is also investing its resources in inventing new gaming experiences, building and running cloud-based services, andapplying AI to drive insights.
Stock Recommendation: At the current market price of $137.41, the stock is trading at a price to earnings multiple of 27.1x with a current dividend yield of 1.3104%. Gross profit margin of the company for the year stood at 65.9%, relative to the industry median of 77%. Current ratio improved to 2.53x from 2.90x in the previous year. The company recorded a CAGR (Compounded Annual Growth Rate) of 32% on net income in the time span of 2015-19. The company recently informed thatit will announce the financial results for the first quarter of the fiscal year 2020 on 23 October 2019 and will hold its Annual General Meeting on 4 December 2019. Considering the aforesaid facts, recent developments and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $137.41, down 1.63% as on 18 October 2019.

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