Here’s What to Expect from Amazon (AMZN) in Q1 Earnings Show Tonight

Wedbush's Michael Pachter is confident this e-commerce leader is set to dish out meaningful earnings long-term- and Q1 sales upside after the bell.

Wedbush analyst Michael Pachter is making a bullish call on, Inc. (NASDAQ:AMZN) as the e-commerce king readies to release its first quarter print this evening. On back of roaring Amazon Prime subscription growth, the analyst believes the company will score sales upside in the first quarter of the year. This stock is a confident pick for the long-term, as far as Pachter is concerned, a machine that has made its mark generating stellar revenue growth.

As such, the analyst maintains an Outperform rating on AMZN stock with a $1,750 price target, which implies an 18% upside from current levels. (To watch Pachter’s track record, click here)

“Amazon can deliver substantial earnings over the long term by growing spending more slowly than revenues. Amazon Web Services, Fulfillment by Amazon, and ads should drive steady margin growth, with Prime driving overall retail revenue growth,” asserts Pachter. After all, more than five billion items were shipped to Prime members last year, and beyond half of these units were sold on Amazon from third-party sellers. The analyst forecasts the average Prime sales contribution per customer last year surged past $1,700.

For the first quarter, Pachter believes that in addition to a wave of Prime momentum, Amazon stands to benefit from “favorable tax legislation providing the opportunity to deliver a more outsized EPS beat.” The analyst forecasts $50.00 billion in sales from the Amazon empire, $1.11 billion in operating income, and $1.43 in EPS against consensus of $49.87 billion, $1.05 billion, and $1.27. For context, the AMZN management team guides sales of $47.75 to $50.75 billion and operating income of $0.30 to $1.00 billion.

Pachter continues, “As always, uneven and unpredictable spending decreases visibility into profitability. In its 2017 Letter to Shareholders, Amazon disclosed that it has over 100 million paid Prime members worldwide. We estimate that this figure is up roughly 50% y-o-y, well above the 27% combined growth that we modeled for net product sales (excluding an estimated $4 billion contribution from Whole Foods Market, “WFM”) and net service sales in Q1:18, implying that revenue upside is likely. Our 2018 revenue estimate of $232.85 billion, which contemplates growth of 31%, also appears overly conservative given that we modeled net product sales and net service sales up only 24%, excluding WFM contributions of $6 billion in 2017 and an estimated $16 billion in 2018.”

Glancing ahead to the second quarter, Pachter anticipates a guide indication a slight sequential boost in revenue and an operating income that should fall flat. For second quarter sales, the analyst projects $52.30 billion from Amazon, with $0.92 billion in operating income and $1.12 in EPS against the Street’s $52.20 billion, $1.15 billion, and $1.46. Considering last year, the analyst believes it “reasonable” to anticipate sequential revenue growth reflecting $2.2 to $2.3 billion in the guide, with room for higher gains considering the Whole Foods asset now in Amazon’s back pocket. Look for Prime Video to be a star of the show this year, concludes Pachter, who believes this serve is allowing “impressive” subscription gains to come into play.

TipRanks indicates a strong bullish consensus circling this e-commerce empire. Out of 38 analysts polled in the last 3 months, 37 are bullish on AMZN stock while just 1 remains on the sidelines. With a return potential of 17%, the stock’s consensus target price stands at $1,711.97.

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