Google and Amazon stock price analysis as Jeff Bezos is set to step down as CEO

By: Michael Harris
Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to… read more.
on Feb 3, 2021
  • Amazon reported it earned $14.09 per share, which is nearly double compared to analysts’ estimates
  • The founder and CEO Jeff Bezos is stepping down as the head of the company
  • Google owner Alphabet reported EPS of $22.30 to beat the $15.90 expected from the market analysts

Ecommerce giant company Amazon (NASDAQ: AMZN) and the online search giant Alphabet (NASDAQ: GOOGL), which owns Google, both presented extremely strong financial earnings reports for the fourth quarter that ended December 31, 2020. 

Amazon smashes earnings, Bezos to step down

Amazon reported it earned $14.09 per share, which is nearly double compared to analysts’ estimates of $7.23 earnings per share (EPS). The business generated revenues of $125.56 billion to surpass the $100 billion mark for the first time in its history. Market analysts expected $119.7 billion in revenues from the company. 

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For the ongoing quarter, the company said it projects net sales to arrive between $100 billion and $106 billion, representing an increase of 33% to 40% compared to a year ago. 

Even more importantly, the online retailing business announced that the founder and CEO Jeff Bezos is stepping down as the head of the company and will transition to the role of the Executive Chair in the third quarter. He is due to be replaced by the head of AWS Andy Jassy.

“Amazon is what it is because of invention. We do crazy things together and then make them normal. We pioneered customer reviews, 1-Click, personalized recommendations, Prime’s insanely-fast shipping, Just Walk Out shopping, the Climate Pledge, Kindle, Alexa, marketplace, infrastructure cloud computing, Career Choice, and much more,” said Jeff Bezos, the founder and CEO of the ecommerce business. 

“If you do it right, a few years after a surprising invention, the new thing has become normal. People yawn. That yawn is the greatest compliment an inventor can receive. When you look at our financial results, what you’re actually seeing are the long-run cumulative results of invention. Right now I see Amazon at its most inventive ever, making it an optimal time for this transition.”

Transitions of this magnitude could be challenging for any business but the company’s Chief Financial Officer (CFO) Brian Olsavsky reiterated the online retailing business has a “highly effective” succession plan in place.

“I will reiterate that Jeff is not leaving. He is getting a new job. He will be involved in many large one-way-door issues, as we say, one-way doors meaning the more important decisions things like acquisitions, things like strategies, and going into grocery and other things,” he said during a call with investors. 

Google reports strong growth in the ads business

In a similar fashion, Google owner Alphabet reported earnings of $22.30 per share to beat the $15.90 expected from the market analysts. Revenue surged 23% to $56.90 billion vs $53.13 billion expected. 

Google said it raked $46.20 billion from ads, representing an increase of 22% as it generated revenue of $37.93 billion in the last year.

“Our strong results this quarter reflect the helpfulness of our products and services to people and businesses, as well as the accelerating transition to online services and the cloud. Google succeeds when we help our customers and partners succeed, and we see significant opportunities to forge meaningful partnerships as businesses increasingly look to a digital future,” Sundar Pichai, CEO of Google and Alphabet, said.

“Our strong fourth quarter performance, with revenues of $56.9 billion, was driven by Search and YouTube, as consumer and business activity recovered from earlier in the year. Google Cloud revenues were $13.1 billion for 2020, with significant ongoing momentum, and we remain focused on delivering value across the growth opportunities we see,” Ruth Porat, CFO of Google and Alphabet, said.

Susquehanna’s Shyam Patil described fourth-quarter results as a “strong beat” leading him to hike the price objective on GOOGL to a Street-high of $3,000.

“GOOGL benefited from a strong holiday season and budget flush. Search growth accelerated 10 points to 17% y/y ex FX, and YouTube had a blowout quarter, accelerating 13 points to 46% y/y ex FX revenue growth. Entering 2021, GOOGL should benefit from easy comps in 1H, particularly in 2Q, though comps will likely get tougher in 2H,” the analyst wrote in today’s note

Technical analysis: GOOGL gains

Google stock price opened 7% higher to hit a fresh all-time high of $2,082.47 after the company delivered a strong beat. The old resistance at $1,950 now becomes support as GOOGL inventors will now target $2,250.

Google stock daily chart (TradingView)

Amazon stock price gapped modestly higher but it quickly reversed gains to now trade 0.3% lower at $3,370. Nearby support is located in the context of the broken triangle at $3,330. Traders looking to buy AMZN stock will look for a move above the record-high $3,555 towards $3,740.

Amazon stock daily chart (TradingView)

Summary

Ecommerce business titan Amazon announced fourth-quarter results that smashed analysts’ expectations. The founder and CEO Jeff Bezos also announced he is stepping down as the CEO of the company and will transition to the role of the Executive Chair. On the other hand, shares of Alphabet are up over 7% in pre-open Wednesday after the company also reported stronger-than-expected results across the board. 

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