As earnings reports for Amazon and $Spotify Technology S.A.(SPOT)$ loom on the horizon, it's time to analyse which of these tech titans offers the better investment opportunity. With Amazon set to release its earnings soon and Spotify’s Q2 2024 report expected on Tuesday, July 23, let's dissect their financials, performance, and future prospects.
Financial Performance and Metrics
Amazon: A Tech Behemoth on the Rise
Amazon’s Q1 2024 results were nothing short of impressive. The company reported revenue of $143.3 billion, up 13% year-over-year, despite a 16% quarter-over-quarter decline due to seasonal factors. $Amazon.com(AMZN)$ surpassed Wall Street estimates by approximately $764 million, showcasing its resilience and growth potential. GAAP EPS surged to $0.98 per diluted share, a significant leap from $0.31 the previous year. As of July 18, 2024, Amazon’s stock traded at $183.75.
Amazon's quarterly revenue and EPS growth 2022-2024
Amazon's profitability has been significantly boosted by its cloud computing division, Amazon Web Services (AWS), which saw a remarkable 17% year-over-year revenue increase and an 84% rise in EBIT. Additionally, Amazon’s North American and international retail sectors showed solid growth, with sales increasing by 12% and 10% year-over-year, respectively.
Spotify: The Audio Streaming Powerhouse
The immersive experience of music and digital audio
Spotify has demonstrated robust financial performance in 2024. The company is expected to report a significant profit turnaround for Q2 2024, with earnings per share (EPS) projected to jump to $1.12 from a loss of $1.69 in Q2 2023. Revenue for the quarter is forecasted to reach $3.8 billion, nearly 20% higher than the same period last year. As of July 18, 2024, Spotify’s stock stood at $290.16, marking a year-to-date gain of over 55%.
Spotify's quarterly revenue and EPS growth 2022-2024.
Spotify’s growth has been fuelled by an increase in monthly active users (MAUs) and premium subscribers. The company expects to add around 15 million new MAUs in Q2, bringing the total to 631 million, with premium subscribers expected to reach 245 million.
Investment Opportunities and Future Prospects
Amazon: Stability with Diversified Growth
Amazon’s strategic investments in AI technology, cloud services, and operational efficiencies position it well for future growth. With analysts projecting adjusted earnings of $4.57 per share for the fiscal year ending December 2024, Amazon’s outlook remains strong.
Amazon’s diverse business model, spanning e-commerce, cloud computing, and digital advertising, provides multiple revenue streams and mitigates risk. The company’s focus on enhancing customer experiences and leveraging AI for operational efficiencies further solidifies its market dominance.
Spotify: High Growth Potential in Digital Audio
Spotify’s focus on monetisation and efficiency improvements is yielding positive results. The company’s expansion into podcasts and audiobooks, coupled with its growing international user base, presents significant growth opportunities. Gross margin is expected to improve to 28.1% in Q2 2024, driven by cost efficiencies and premium subscription revenue.
Amazon vs. Spotify: Stock performance comparison over the past year
Spotify’s ability to convert free users into paid subscribers remains a key growth driver. Strategic price hikes in various markets and an expanding content offering bolster its revenue potential. Furthermore, Spotify has cemented its leadership in the podcast industry with its audio platform, creative tools, and advertising network. Meanwhile, Amazon is eyeing this space too, evidenced by its $80 million deal with Dax Shepard to strengthen its podcast advertising efforts.
Which is the Better Stock?
Both $Amazon.com(AMZN)$ and Spotify offer compelling investment opportunities, catering to different investor profiles. Amazon, with its diversified business model and strong financial performance, is a solid choice for those seeking stability and long-term growth. Its leadership in e-commerce and cloud computing, along with strategic investments, ensures sustained profitability.
Conversely, $Spotify Technology S.A.(SPOT)$ presents high growth potential for investors looking to capitalise on the burgeoning digital audio market. The company’s focus on monetisation and efficiency improvements, combined with robust user growth, indicates a promising path to profitability.
Is Now the Right Time to Buy?
With earnings reports imminent, it might be wise to wait for the results before making a decision. Amazon’s strong Q1 performance and positive outlook suggest it could continue to outperform, making it a good buy for long-term investors. Spotify’s anticipated profit turnaround and strong user growth make it an attractive option for growth-oriented investors.
In conclusion, both Amazon and Spotify have unique strengths and growth prospects. Your choice depends on your investment strategy and risk tolerance. Amazon offers stability and diversification, while Spotify provides high growth potential in the evolving digital audio market.
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Comments
It is important to closely monitor the performance of online retail companies like AMZN SHOP during the second quarter earnings period.
What impact do you think the results will have on...
SHOP is sitting right on a prior support level. Let's see if it holds. Low risk entry in either direction, as we can get out right away if wrong. Let the opening volatility shake out first.
I added aapl and amzn. Also added some coin and shop at close to get exposed to crypto … would have liked a little deeper correction on aapl but might on dip from here.
The e-commerce landscape is highly competitive. While giants like Amazon and Walmart lead online shopping, smaller companies like Shopify and Etsy have also established strong footholds.
Amazon!