Tag: jp morgan

Amazon makes a killing

AmazonOnline bookseller Amazon has made a killing and swept away analysts’ estimates and dusted the mantelpiece of doubts about the online retailer’s investment spree.

JP Morgan analysts muttered in a research note that whatever Amazon was doing it appeared to be working.

“While it’s tempting to try to pull out each component of Amazons  strong 1Q and generally recent performance, we think it’s the combination of many factors – the ‘Amazons Flywheel’, Prime, a growing distribution footprint, getting closer to customers, 3P (third party), AWS … the list goes on,” a JP Morgan analyst grumbled.

The “Amazon Flywheel” was Jeff Bezos’ cunning plan of offering the biggest selection of goods at the lowest prices and providing the best customer experience to create a “positive feedback loop” – whatever that is.

Amazon is also known for making bold investments in new business areas even at the expense of profits – a strategy that is often criticised by investors.

“We believe these results are further evidence that Amazon’s investment in infrastructure, logistics, and Web services is accelerating market share gains, cash flow growth and continued high returns on invested capital,” Goldman Sachs analysts wrote in a client note.

Revenue in Amazon’s three main businesses – online retailing in North America, international online retailing, and cloud business Amazon Web Services – swelled 27 percent, 26 percent and 64 percent respectively.

The company also offered a bright outlook, with revenue guidance for the current quarter of $28 billion to $30.5 billion, compared with the $28.33 billion analysts expected.

AWS, launched 10 years ago, delivered more profit in the first quarter than Amazon’s retail business.

While AWS is Amazon’s fastest-growing business, Amazon Prime and Marketplace, where the company acts as a middleman for third-party vendors, are also gaining momentum.

Amazon’s Prime loyalty program offers one-hour delivery, original TV programming and access to digital entertainment products such as Prime Music and Prime Video for an annual $99.

All this means that Amazon is valued at $317 billion, making it the third-largest U.S.-listed company by market value, behind Apple and Alphabet, both of which posted disappointing quarterly results.

Amazon shares, which have gained 40 percent in the past year, trade at 98.7 times forward earnings, indicating that investors see huge potential for more growth. Apple trades at 10.8 times earnings, while Alphabet trades at 19.9 times.

 

Apple expected to pull US economy out of ruin

In the middle of the presidential campaign where two sides are claiming to have the answers to the US’s economic woes, analyst outfit J.P. Morgan is putting its money on Apple to save the US.

According to Reuters, J.P. Morgan’s chief economist, Michael Feroli told clients he expects that the the next generation iPhone 5, which Apple will announce today, would give a significant boost to the overall US economy.

He claims that the new iPhone could add between a quarter and a half percentage point to fourth quarter annualised growth in the US.

Basically this would help pull the US out of any depression as the annualised GDP growth could grow by $3.2 billion, or $12.8 billion at an annual rate.

The numbers are based on Apple selling around 8 million iPhone 5s in the fourth quarter for about $600. This means that the government can factor in $400 per phone into its measure of gross domestic product for the fourth quarter.

Feroli admits that the economic impact of the iPhone 5 “seems fairly large, and for that reason should be treated skeptically”. But, he added, “we think the recent evidence is consistent with this projection”.

It is based on the idea that when the last iPhone was launched in October 2011, sales significantly outperformed expectations. This was mostly because it was the same phone as the early model with a broken voice activated search. No one thought anyone would be dumb enough to buy that.

The iPhone 5 launch is expected to be much larger, and Feroli wrote that he thinks the estimate mentioned is reasonable.

Of course, this is the same JP Morgan which in April took huge $2 billion trading losses at its London branch, Trader Bruno Iksil, nicknamed the London Whale, and which made a few dodgy investments as part of the company’s “hedging” strategy.

Feroli does seem to suggest that if the US wants to get itself out of a recession its citizens should buy an iPhone. While this might improve the GDP figures it would be hard to see how adding to Apple’s cash pile and the bottom line of lots Chinese and Taiwanese suppliers would actually help the US economy. 

JP Morgan risks all on a supercomputer

While the rest of the finance industry has been reeling from problems based on the automation of its decision making processes, Financial house JP Morgan is allowing a supercomputer to start making some of its important decisions.

The outfit is running its run risk analysis and price its global credit portfolio using a High Performance Computing (HPC) system developed by Maxeler Technologies.

The system is based on a Field-Programmable Gate Array (FPGA) technology that would allow it to run complex banking algorithms faster.

The financial house uses mainly C++ for its pure analytical models and Python programming for the making things happen. Under the new Maxeler system, the C++ code has been replaced mostly by Java.

The outfit has been trying to work out why it failed to spot suspicious Madoff trades, when it was possible to see his plans by just Googling the bloke.

Part of the problem, JP Morgan claims, is that it would take eight hours to do a complete risk run, and an hour to run a present value, on its entire book. If anything went wrong with the analysis, there was no time to re-run it.

Now the supercomputer can do it all in about 238 seconds.

Stephen Weston, global head of the Applied Analytics group in the investment banking division of JP Morgan, said that if the company can compress space, time and energy required to do these calculations then it has business value.

Rather than looking at a company’s risk based on the previous day, it can do the whole lot, more or less in real time.

This speed can identify potential problems and try to deal with them in advance. Now it is able to spot its exposure to problems such as the Irish or Greek bank problems, which was unthinkable before.

Instead of using existing standard multi-core machines, JP Morgan used FPGA technology which can ‘pipeline’ instructions. This means calculations can be executed very quickly by breaking down calculations into simple components that can then be built into ‘pipelines’.

By being super pipelined it can do a huge volume of calculations more than it can with a ‘traditional’ CPU.

The project took JP Morgan around three years, and the bank is now looking to push it into other areas of the business.