Two of the largest e-commerce and cloud infrastructure companies in the world, Amazon (AMZN) and Alibaba Group Holding Ltd. (BABA), reported their most-recent earnings reports on Tuesday.
BABA’s business is so similar to Amazon that it’s considered the “Amazon of China.” The company runs the largest online marketplace in China and the Alibaba Cloud is China’s leading cloud platform. Amazon dominates e-commerce in the U.S. and Europe and owns Amazon Web Services (AWS), which is the largest cloud platform in the world.
So how did Amazon do versus the Amazon of China in terms of earnings? Let’s take a look.
Amazon achieved total fourth-quarter revenue of $125.56 billion, their largest quarter revenue of all time. This topped analysts’ estimates for $119.7 billion. Revenue is up 38% year-over-year. Amazon also achieved third-quarter earnings of $14.09 per share, beating analysts’ forecasts of $7.23 by 94.8%.
AWS’s revenue rose 28% to $12.7 billion, year-over-year, but fell short of analysts’ expectations of $12.83 billion.
Amazon also revealed Jeff Bezos would step down as CEO and be an executive chairman. Andy Jassy will replace Bezos as CEO during the third quarter of 2021. Jassy is currently the CEO of Amazon Web Services and has been with Amazon since 1997. Forbes magazine described Jassy as “Jeff Bezos ‘Shadow,’” or simply put: Jassy is Bezos’ technical advisor and chief of staff, so it’s clear why he will take the position as CEO.
Alibaba Group Holding Ltd. (BABA)
For the most-recent quarter, Alibaba reported total revenue of $33.88 billion, or 37% annual revenue growth. Third-quarter earnings per ADS increased year-over-year to $3.38. The consensus estimate called for earnings of $3.17 per ADS on $33.49 billion in revenue, so BABA posted a 6.6% earnings surprise and a slight revenue beat.
Annual active consumers on Alibaba’s sites climbed to 773 million and mobile monthly users rose to 902 million, as the company’s domestic core commerce business continues to grow steadily.
The company also reported $2.49 billion in cloud computing revenue, which is up 50% year-over-year. The company stated this rise was driven by “…robust growth in revenue from customers in the Internet and retail industries and the public sector.”
Positive Earnings Doesn’t Always Mean Strong Buys
According to my Portfolio Grader tool, the companies receive a B-rating for their Total Grade, making both “Buys.” However, AMZN also has a B-rating for its Fundamental Grade, topping BABA’s C-rating. So, AMZN’s fundamentals are a bit stronger. These companies both receive an F-grade for Earnings Momentum. BABA has a D-rating for Cash Flow, while AMZN has a C-rating.
Amazon’s Report Card Alibaba’s Report Card
AMZN does receive an A-rating for its Sales Growth, Operating Margin Growth, Earnings Growth and Earnings Momentum. BABA, on the other hand, earns a D-rating for its Operating Margin Growth and Earnings Growth, and an F-rating for Earnings Momentum.
So, based on the results and Portfolio Grader, Amazon clearly beats the “Amazon of China.”
However, I’m not interested in either company right now. The reality is there are lesser known but fundamentally superior stocks that are well-positioned for major growth ahead.
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Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owned the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Alibaba Group Holding Ltd. (BABA), Amazon (AMZN)