Weekly Earnings Outlook

Update 5 February

South Africa’s used car leader, WeBuyCars, is revving its engine for an exciting future. In collaboration with its founders, Transaction Capital, the parent company, is exploring an unbundling and separate listing of WeBuyCars on the Johannesburg Stock Exchange (JSE). This strategic move has ignited optimism about the company’s growth potential, fueled by its unique selling proposition: cutting-edge technology.

The dynamic market environment demanded resilience, which the company showcased in the second half of 2023 with a remarkable turnaround. They bounced back with increased sales volumes (13% growth) and a robust recovery in unit sales (141,851 units). This resilience was further bolstered by the company’s national expansion, adding 1,759 new parking bays, bringing its total capacity to 10,339. The sales landscape witnessed a shift, with business-to-business (B2B) sales on the eCommerce platform declining. This trend is attributed to the economic climate impacting smaller dealerships. However, WeBuyCars capitalized on the growing online consumer demand, experiencing a positive rise in business-to-consumer (B2C) online sales.

While WeBuyCars demonstrated its adaptability, the company also faced challenges due to changing vehicle market demands. Lower-priced vehicle margins were impacted, reflecting the increased competition in the South African used car market.

Despite these hurdles, WeBuyCars’ management remains optimistic about the medium to long-term potential of the market. They emphasize the company’s unique positioning, driven by its technological edge and expansive national footprint, which positions them for continued success.

Alphabet Inc. (NASDAQ: GOOG)

Alphabet’s recent earnings report paints a mixed picture. While overall revenue exceeded expectations and reached its fastest growth since early 2022, a miss on crucial ad revenue sent shares tumbling.

Revenue jumped 14% year-over-year, thanks to a record-breaking holiday season and a successful Prime Day event. Amazon Web Services, Amazon’s cloud computing arm, met expectations with $24.2 billion in sales, despite facing a slight slowdown in growth. Key areas like Google Cloud (26% growth) and YouTube showed promise but fell slightly short of estimates. This, coupled with Facebook’s faster ad growth and TikTok’s rising popularity, dampened investor enthusiasm.

However, Alphabet boasts a profitable and expanding cloud business, with Google Cloud generating its first operating income. CEO, Sundar Pichai maintains focus on AI investments, which is evident in launches like the large language model Gemini. Cost-cutting measures are planned to fund these ventures following last year’s 6% workforce reduction.

Amazon.com Inc (NASDAQ: AMZN)

Amazon’s fourth-quarter report resonated with cheers on Wall Street, sending its stock soaring over 8% in after-hours trading. The e-commerce giant surpassed analyst expectations across the board, boasting earnings per share of $1.00 and a revenue jump of 14% to $170 billion. This robust performance was fueled by a record-breaking holiday season, a thriving Prime Day event, and continued growth in its cloud computing arm, Amazon Web Services (AWS).

CEO Andy Jassy’s focus on cost control and efficiency was crucial to Amazon’s success. Strategic cuts across various units, including a 27,000-employee workforce reduction, helped streamline operations and boost profitability. While maintaining a cautious approach to new investments, CFO Brian Olsavsky reassured continued support for strategic growth areas like advertising, which saw a 27% surge in revenue, and generative AI. Amazon’s recent foray into showing ads on Prime Video content is expected to unlock substantial new revenue streams, while the company’s AI-powered shopping assistant “Rufus” is currently being tested, hinting at future possibilities in this domain.

However, challenges remain. Sustaining AWS’ growth amidst slowing cloud spending and rising competition requires strategic maneuvering. Balancing efficiency with innovation in the current economic climate is another tightrope walk. Successfully integrating and responsibly deploying AI across various segments will be critical for ensuring future success.

Despite these hurdles, Amazon’s Q4 results stand as a testament to its adaptability and strategic vision. By effectively controlling costs, investing in promising areas, and embracing emerging technologies like AI, Amazon appears well-positioned to navigate the evolving tech landscape and maintain its momentum in the years to come.

Sources: Daily Investor; MoneyWeb; CNBC

Piece written by Trive Sales Trader, Kealeboga Molefe

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