Amazon Shows Rising Sales During 4th Quarter Earnings

BezosAmazon reported strong fourth quarter earnings on Thursday fueled by stronger sales and rising Prime membership during the crucial holiday period as the Seattle based e-commerce company showed its investors that profits can still be delivered even with the company’s pattern of spending heavily on future investments.

In 2014 Amazon created a new video top box, a digital voice recognition assistant named Echo, and developed new markets for its same day delivery service while the company continued to invest in its fulfillment centers around the globe.

Amazon also launched the Fire phone in 2014 which never caught fire in the consumer market, resulting in the company taking a $170 million write-down last quarter.

In April Amazon raised the price of its Prime membership to $99.00 from $79.00 giving its Prime members full access to its video streaming library, unlimited photo storage, and free 2 day shipping.

The $20.00 price increase didn’t turn consumers away from Amazon Prime because worldwide paid membership grew 53 percent in 2014.

“When we raised the price of Prime membership last year, we were confident that customers would continue to find it the best bargain in the history of shopping. The data is in and customers agree…. on a base of tens of millions, worldwide paid membership grew 53 percent last year,  50 percent in the U.S. and even a bit faster outside the U.S.,” said founder and Amazon.com CEO Jeff Bezos during the conference call.

Worldwide active customer accounts were approximately 270 million the company reported.

For the quarter, net sales increased 15 percent to $29.33 billion, compared with $25.59 billion in the fourth quarter of 2013 but slightly below the consensus forecast of $29.7 billion.

Amazon’s net sales would have been 3 percent higher if it weren’t for the negative impact from foreign currency exchange rates.

“Excluding the $895 million negative impact from year-over-year changes in foreign exchange rates during the quarter, net sales increased 18 percent compared to fourth quarter 2013″  said Brian Olsavsky, Amazon’s VP CFO in Global Consumer Business.

For the entire year of 2014, Amazon had a net loss of $241 million, compared with net income of $274 million in 2013, as the company’s operating expenses climbed 20 percent in 2014.

Amazon reported yesterday that Amazon Web Services (AWS) continues to grow steadily, with usage growth close to 90 percent year-over-year for the fourth quarter of 2014.

New video content will be added for Amazon Prime members in 2015.

Amazon Studios is producing the first television series from director and producer Woody Allen that will debut exclusively on Prime Instant Video in the U.S., U.K., and Germany in 2015.

Guidance

Amazon forecasts 1Q 2015 sales of 20.9 billion to 22.9 billion, which was below the consensus forecast of 23 billion.

-Johnathan Schweitzer

Apple Outperforms, Sets New Records Led By Strong iPhone 6 Sales

cookApple reported 2015 first quarter fiscal earnings for the fourth quarter of 2014 that easily surpassed analysts’ estimates and set an all time record for revenue, boosted by strong demand for the new iPhone 6 which also set an all time record high for unit sales.

Apple CEO Tim Cook expressed gratitude to Apple customers whose purchases in the final holiday quarter of 2014 helped the Cupetino, California company to reach new heights.

“We’d like to thank our customers for an incredible quarter, which saw demand for Apple products soar to an all-time high,” said Tim Cook, Apple CEO during the conference call.

Cook acknowledged that Apple had record new customers to iPhone and more Android switchers than in the previous 3 launches.

“In aggregate, we saw more new customers to iPhone than we’d ever seen before. We had higher rate of Android switchers than we had in three previous launches” Cook said.

For the quarter, Apple reported revenue of $74.6 billion, a 30 percent increase over last year, and a net profit of $ 18 billion, a 38 percent bump, and above the previous record by almost $5 billion which easily outperformed revenue of $57.6 billion and a net profit of $13.1 billion in the same quarter last year, amounting to an increase of 48 percent in earnings per share.

Gross margin was 39.9 percent compared to 37.9 percent in the same quarter last year.

CEO Tim Cook admitted that a strengthening U.S. dollar during the past few months impacted Apple’s international sales which accounted for 65 percent of the quarter’s revenue.

“It goes without saying, a strong US dollar has a negative impact on our international business” Cook said.

The United States generated the highest revenue for Apple last quarter with $30,566 billion followed by Europe at $17,214 billion and China at $16,144 billion, marking a 70 percent increase.

The iPhone continues to be the highest source of revenue for Apple by a wide margin compared to its other products.

For the quarter, the iPhone generated $51,182 billion in revenue trailed distantly by iPad revenue of $ 8,985 billion and Mac revenue of $ 6,944 billion.

According to IDC, Android had the largest market share of smartphones in 2014 with 66.6 percent followed by Apple’s iOS at 30.4 percent, Microsoft’s Windows at 2.0 percent, and others at 0.9 percent.

iPhone

Apple sold a record 74.5 million iPhones during the past quarter, representing 46 percent growth over last year.

Unit sales increased 44 percent in the U.S. and 97 percent in BRIC countries.

Sales doubled year over year in China, Brazil and Singapore.

Revenue from I-Tunes, software, and services grew at a double digit rate.

Although Cook claimed that essentially over 80 percent of commerce on tablets is on the iPad, the latest quarterly results for the iPad were not stellar.

For the quarter 21.4 million units were sold compared to 26 million last year.

However, Mac sales performance was good for the quarter which saw 14 percent growth, reaching a record revenue of $6.9 billion.

Cook said that Mac saw double digit year over year unit growth despite the contraction of the global PC market which declined 3 percent for the quarter.

Apple Pay and Apple Watch

Cook claimed that “2015 will be the year of Apple Pay” and confirmed that Apple Pay is already off to a good start.

“Feedback is extremely positive. Today, 750 banks and credit unions have signed on to bring Apple Pay to their customers. Three months after launch, Apple Pay makes up more than 2 of 3 purchases using contactless card payments across Visa, MasterCard, American Express.

Cook said that the new Apple Watch, the first new product since the iPad in 2010, will be shipped in April.

Forward Guidance

Forward guidance in the next March quarter includes revenue between $52 and $55 billion versus $46 billion a year ago.

Gross margin between 38.5 percent and 39.5 percent.

Operating expenses between $5.4 billion and $5.5 billion.

Concerning forward guidance, Cook admitted that  he’s “bullish” on the prospects for the iPhone.

“You can see from the March guidance that we’ve given that we’re bullish about iPhone going forward. We believe that it’s the best smartphone in the world, our customers are telling us that, the market is telling us that. We’re doing well in virtually every quarter of the world” Cook said.

-Johnathan Schweitzer   * Note: The paypal icon located at the top of this page is not for decoration. Please consider donating to this site.

Johnathan1Johnathan Schweitzer is a Seattle- based writer who writes about finance, politics, and technology

schweitz31@gmail.com

 

 

 

Durable Orders Shows Weakness; First Federal Reserve Meeting of 2015 To Weigh Fed Policy

durableU.S. stocks are down sharply on Tuesday and experiencing selling pressure after weaker than expected durable orders data released this morning disappointed investors’ expectations, and as 4th quarter earning season unfolds, there are renewed concerns about international growth, falling commodity prices, and its overall impact on corporate earnings.

Shares of Microsoft and mining company Freeport-McMoRan are down in trading on Tuesday.

Mining company Freeport-McMoRan reported weaker than expected 4th quarter earning results as the company takes aggressive actions to defer capital expenditures in a move to offset a sharp decline in commodity prices.

This week several other technology companies will report corporate earnings, including Apple.

Durable orders for December missed expectations and showed a decline of -3.4 percent, below the forecast of -3.2 from briefing.com. Durable goods minus transportation also came in weaker than expected after showing a decline of -0.08, below a forecast of + 0.05 percent.

Investors are waiting for a response from the Federal Reserve during their first meeting of 2015 which comes as inflation faces pressure due to falling oil prices, the U.S. dollar has strengthened, and the euro has declined sharply after the ECB decided to take aggressive monetary stimulus actions to combat the risk of deflation.

Investors are awaiting to see if those economic forces may influence the way that the U.S. Federal Reserve is considering when to raise interest rates with most economists forecasting a rate increase in mid 2015.

Syriza Party leader Alexis Tsipras was sworn as Greece’s new prime minister on Monday and will soon be meeting with EU finance ministers and its creditors to try and work out a plan to keep their bailout plan intact.

Later this morning at 10:00 EST, consumer confidence results for January and new home sales results for December will be released.

-Johnathan Schweitzer

Greece Elects Anti-Austerity Syriza Party; Showdown Begins With International Creditors

Opposition leader and head of radical leftist Syriza party,  Tsipras addresses supporters during a campaign in central AthensSyriza party leader Alexis Tsipras is expected to be sworn in on Monday and have a new Greek government in place by Wednesday after Syriza party won 149 seats in Greece’s 300 member parliament, two seats short of an absolute majority, in Greece’s snap election on Sunday that handed Greece with new leaders seeking to overturn its imposed austerity program and chart a new course for Greece in the European Union as it grows impatient following structural fiscal reform measures.

During a victory speech, Tspiras sounded like a liberationist fighting an unjust opprerssive force that invaded Europe made up of northern Eurpopean austerity imperialists that have called for deeper Greek pension cuts, more tax collections, and public spending limits.

Tsipras said that the victory for his party on Sunday was a “victory for all peoples of Europe fighting austerity” and “it makes the Troika a thing of the past” as he explained that his government would seek to find a solution to end its massive debt while eliminating corruption.

It remains unclear if Tsipras is truly capable of renegotiating with Greece’s international creditors and achieving any success pushing for an elimination of austerity measures or a write off with Greece’s €322 billion of public debt.

Hanging in the balance is Grece’s €240 billion international bailout package from the so called troika of international creditors from the ECB, European Union, and the IMF that has a February 28th deadline for Greece’s compliance with its austerity progam.

A delay of that deadline could jeopardize a liquidity line of €40billion targeted for Greece’s vulnerable banks.

Greece’s international creditors have insisted that Athens must still honor its bailout agreement if it is to receive continued financial support.

Euro area finance ministers are meeting on Monday to threaten Athens’ newly forming government and make it known that  renegotiations of Greece’s debt will close down unless Athens fulfills its earlier commitment of following austerity and fiscal reforms.

-Johnathan Schweitzer

 

Greek Vote To Determine Its Relationship With EU; International Creditors

SYRIZAGreece is holding a snap general election today after Greece’s parliament failed to receive enough votes on December 29th to elect a new president.

Recent polls show leftist party Syriza, led by Alexis Tsipras (pictured), is currently in the lead and stands poised to move ahead of rival New Democracy party in the country’s 300 member parliament but they may still lack the 151 seats needed in parliament to govern alone.

Tsipras has said that he wants Greece to remain in the 19 member euro currency union but he also seeks to discard the majority of the conditions attached to Greece’s current € 240 billion ($270 billion) international bailout package that includes austerity measures, labor reforms, cuts to public spending and asset sales to help reduce Greece’s public debt of €322 billion in the third quarter of 2014.

Tsipras said before a party meeting in early January that his Syriza Party would ensure that the majority of Greece’s debt would be wrriten off during renegotiations with its international creditors from the so called “troika” represented by the European Commission (EC), the International Monetary Fund (IMF), and the European Central Bank (ECB).

The prospect of a Syriza victory during today’s elections has renewed fears that Greece could default on its loans and exit the euro currency pact with the other 18 countries of the euro area.

Although Greece’s economy is slowly growing again, Greece’s unemployment level is the highest among the other 19 countries in the euro area at 26 percent, inflation is the most deflated at -2.5 percent as of December 2014, and the country’s debt is 176 percent of GDP in the third trimester of 2014, according to eurostat, a level that is considered to be unsustainable.

On December 8th Greece’s international creditors agreed to support a two-month extension of the bailout program after Greece showed a shortfall of  € 2 billion.

German Chancellor Angela Merkel called for unity last Friday ahead of Sunday’s election and urged Greece to remain past of the euro area despite saying recently at the World Economic Forum in Davos that Germany would not concede and accept the demands to have Greek debt written off.

“I want Greece, despite the difficulties, to remain part of our story” Merkel said.

On Monday European Commission President Jean-Claude Junker told Russian Agency TASS that a new Greek government should honor its financial commitments.

“The new Greek government must take on the previous obligations, to stay the course of the reforms and be financially responsible” Junker said.

“Europe will continue to support Greece but it is expected that Athens will stick to the promises made to its partners” Junker added.

-Johnathan Schweitzer

 

ECB To Add €60 billion Monthly Stimulus Through At Least Sept. 2016

draghiEuropean Central Bank (ECB) President Mario Draghi announced today during a press conference that the ECB will undertake an “expanded asset purchase program” that consists of combined monthly purchases totaling €60 billion through at least September 2016 but he said the program will remain open ended until inflation stabilizes across the 19 economies of the euro area.

The euro fell sharply on the news and is currently trading at 1.1474.

Draghi said that the ECB’s asset purchases are based on the “capital key” meaning that the asset purchases of sovereign debt will be in proportion to the amount of debt in each country of the 19 member monetary union.

Draghi explained that the ECB won’t purchase more than 25 percent of each bond issue or more than 33 percent of each issuer’s debt.

The economies in the euro area are faced with the threat of deflation, slow economic growth, and high unemployment across its borders.

In December 2014 inflation in the euro area registered in negative territory at -0.2 percent, the lowest rate recorded since September 2009, and down from a positive reading of 0.3 percent in November 14′ and 0.4 percent in October 14′.

That is well below the ECB’s inflation target of just under but close to 2 percent inflation.

By contrast in December 2013 inflation was recorded at 0.8 percent.

The unemployment level in the 19 countries of the euro area is currently at 11.5 percent.

As of November 14′ unemployment was highest in Greece (25.7 percent) followed by Spain (23.9 percent).

The ECB also decided today during its policy meet to leave its main interest rates unchanged at 0.05 percent, an historic low, in addition to keeping its marginal facility rate at 0.30 percent and overnight deposit facility rate in negative territory at -0.20 percent

-Johnathan Schweitzer                schweitz31@gmail.com

Johnathan1

Obama Offers 2015 Agenda In State Of The Union Address

bbbaammaIn his second to last State of the Union address, President Obama delivered a defiant message before a packed Congress holding a Republican majority whose conservative members are expected to challenge and overturn many of the political proposals that were addressed on Tuesday evening.

With an improving economy and the unemployment rate nearly cut in half at 5.6 percent from 10.2 percent in October 2009, President Obama used his State of the Union address to acknowledge the strength of the country during his presidency which comes at a time when other political candidates in Washington D.C. are slowly beginning to line up and prepare on the sidelines for the upcoming 2016 presidential elections.

“At this moment — with a growing economy, shrinking deficits, bustling industry, and booming energy production — we have risen from recession freer to write our own future than any other nation on Earth. It’s now up to us to choose who we want to be over the next fifteen years, and for decades to come” Obama said.

Obama explained that in two weeks he will send to Congress a budget filled with ideas that are “practical and not partisan” before he crisscrosses the country to make a case for the values contained in those ideas.

Some of the ideas that Obama defiantly upheld on Tuesday night included a mix of old and new ideas.

The old ideas consist of more support for the middle class by adopting an increase in the federal minimum wage and not opposing the reform measures that he already enacted with healthcare, Wall St., and immigration.

“We can’t put the security of families at risk by taking away their health insurance, or unraveling the new rules on Wall Street, or refighting past battles on immigration when we’ve got a system to fix. And if a bill comes to my desk that tries to do any of these things, it will earn my veto” Obama said.

Concerning the minimum wage and pay equality, Obama made a compelling case that it’s the right time to approve equal pay for women and to raise the federal minimum wage.

“And to everyone in this Congress who still refuses to raise the minimum wage, I say this: If you truly believe you could work full-time and support a family on less than $15,000 a year, go try it” Obama said.

Some of the new ideas that Obama mentioned in his address include offering free community college education, guaranteeing paid sick leave and maternity leave to more Americans, and improving child care by “creating more slots and a new tax cut of up to $3,000 per child, per year.”

Obama touched on a variety of other themes such as building a stronger infrastructure (stronger bridges, faster trains, newer ports, etc.), bringing more manufacturing jobs back to America, improving cyber security, and adopting tax reform by ending corporate loopholes.

“Let’s close loopholes so we stop rewarding companies that keep profits abroad, and reward those that invest in America. Let’s use those savings to rebuild our infrastructure and make it more attractive for companies to bring jobs home” Obama said.

Obama’s new proposals come with a price tag of $320 billion that will be paid through tax increases over the next 10 years on wealthier Americans and financial firms.

His plan calls for raising capital gains tax to 28 percent from 23.8 percent for Americans earning $500,000 or more and a 7 basis point fee on the liabilities of large U.S. financial firms with assets over $50 billion dollars.

Obama explained that no challenge poses a greater challenge than climate change and the United States remains committed to cutting carbon emissions. Obama has set aside more public lands and waters than any administration in history.

Obama said that the U.S. signed a historic plan with China to “double the pace at which we cut carbon pollution” and pointed out that because the world’s two largest economies came together, other nations are now stepping up to reach an agreement to protect the planet.

-Johnathan Schweitzer

IMF Global Growth Revised Down in 2015

globThe International Monetary Fund (IMF) released a new 2015 world economic outlook that revised global growth 0.3 percent lower despite cheaper international oil and faster U.S. growth.

The IMF projects moderate global growth in 2015 at 3.5 percent, down 0.3 percent from their 3.8 percent forecast in October 2014.

“Even with the sharp oil decline, a net positive for global growth, world economic outlook is still subdued, weighed down by underlying weakness elsewhere” the IMF wrote in their latest global outlook.

The IMF forecasts 2016 global growth to rise 0.2 percent at 3.7 percent.

Among the major global economies showing considerable weakness in 2015 is oil exporter Russia whose 2015 GDP growth forecast was downgraded to -3.0 percent as a result of sharply lower oil prices and increased geopolitical tensions.

“At the country level, the cross currents make for a complicated picture,” said Olivier Blanchard, IMF Economic Counselor and Director of Research.

“It means good news for oil importers, bad news for oil exporters. Good news for commodity importers, bad news for exporters. Continuing struggles for the countries which show scars of the crisis, and not so for others. Good news for countries more linked to the euro and the yen, bad news for those more linked to the dollar.” Blanchard said.

The IMF wrote that the boost to demand from lower oil prices is welcome but central bankers around the globe need to remain accommodative.

“Monetary policy must then stay accommodative to prevent real interest rates from rising, including through other means if policy rates cannot be reduced further” the IMF stated.

China

The IMF projects China’s GDP growth forecast under 7 percent at 6.8 percent due to a combination of slowing outside investment and Chinese authorities putting greater weight on reducing vulnerabilities from recent rapid credit and investment growth.

The IMF forecast expects less of a policy response to the underlying moderation.

Today China’s National Bureau of Statistics reported that China’s 2014 GDP reached 7.4 percent, the slowest rate of growth in 24 years, and slightly below their target of 7.5 percent.

During the fourth quarter of 2014, China’s GDP came in at 7.3 percent, matching the result in the 3rd quarter but lower than 7.5 percent in the second quarter and 7.4 percent in the first quarter

Euro Area

The IMF wrote that weaker investment prospects also hold back growth in the 19 member euro area.

The euro area growth forecast for 2015 was revised downward to 1.2 percent “despite the support from lower oil prices, further monetary policy easing, a more neutral fiscal policy stance, and the recent euro depreciation” the IMF wrote.

Euro area growth forecast for 2016 is 1.4 percent.

In 2014 the euro area saw 0.8 percent GDP growth.

Japan

The IMF said that Japan’s growth forecast for 2015 was revised down to 0.6 percent although they admitted that “policy responses, together with the oil price boost and yen depreciation, are expected to strengthen growth in 2015–16″.

In 2016 Japan’s GDP growth is expected to rise to 0.8 percent.

United States

The IMF revised GDP growth in the United States upwards to 3.6 percent in 2015 due to a much stronger private domestic demand but their projection for growth in 2016 is noticeably lower at 3.3 percent.

“Cheaper oil is boosting real incomes and consumer sentiment, and there is continued support from accommodative monetary policy, despite the projected gradual rise in interest rates” the IMF wrote.

-Johnathan Schweitzer

Johnathan1

 

ECB Stimulus Decision, IMF World Economic Outlook Expected To Move Markets

dreamstimeChinese stocks are currently seeing their highest level of selling since 2008 on Monday following a crackdown on margin lending by Chinese regulators that punished a dozen brokerage firms including the three largest firms in the country.

U.S. equity markets are closed on Monday in observance of Martin Luther King Jr.

This week investors will be paying close attention to a decision that will be reached on Thursday by the European Central Bank (ECB) to provide some additional monetary stimulus in the form of quantitative easing (QE) across the 19 member euro area to minimize the risk of deflation and help generate more economic growth.

In December consumer prices dropped more than expected across the 19 countries using the euro as currency, moving into negative territory for the first time since October 2009 during the height of the global financial crisis.

Eurostat reported on January 7th that annual inflation declined -0.2 percent in December, missing the consensus estimate of a +0.1 increase.

Another important event this week that could impact investor sentiment includes a World Economic Outlook Update scheduled for release early on Tuesday by the International Monetary Fund (IMF) which comes after a decision last week by the World Bank to cut its global growth forecast once again for 2015.

The World Bank cut its 2015 global forecast to 3 percent, down from 3.2 percent in October, and 3.4 percent in June. The Washington-based World Bank forecasts 3.3 percent global growth in 2016 and 3.2 percent in 2017.

On Tuesday evening President Obama will address the nation in his State of the Union address.

Obama is expected to offer some new tax proposals, including a plan to raise capital gains tax to 28 percent from 23.8 percent and impose a 7 basis point fee on the liabilities of large U.S. financial firms with assets over $50 billion dollars.

Some of his other proposals includes helping the middle class with a tax credit for families burdened by child care costs and a retirement tax reform plan that gives 30 million additional workers the opportunity to save for retirement through their employer.

-Johnathan Schweitzer

 

 

Consumer Prices Fall in December

ngConsumer prices fell in December -0.4 percent, the steepest decline in 6 years, led by the decline in oil prices, according to new data today released by the Labor Department and matching a forecast from briefing.com.

The gasoline index continued its slide in December, declining 9.4 percent while the energy index posted its largest one-month decline since December 2008.

In November consumer prices declined -0.3 percent compared to October’s 0.0 percent.

Core CPI, subtracting food and energy, was 0.0 percent in December after a 0.1 increase in November and a 0.2 increase in October.

The all items index increased 0.8 percent over the last 12 months ending in December, down from 1.3 percent ending in November.

-Johnathan Schweitzer