Last Minute Thought: Buy or Sell Amazon (AMZN) Stock Before 3Q18 Earnings?


E-commerce giant Amazon (AMZN) will be in the spotlight when it reports third-quarter results this afternoon. As the countdown to Amazon earnings starts, Wall Street’s confidence backing the stock is strong. About 98% of the analysts surveyed by TipRanks have a Buy rating on AMZN. (See AMZN price targets and analyst ratings on TipRanks)

Investors’ focus will be on the company’s performance in its Web Services business, which is expected to be a major boost to the company’s profitability.

Heading into the print, Stifel analyst Scott Devitt has raised his near- and long-term revenue estimates for Amazon’s retail, advertising, and AWS businesses and modestly increased his margin forecasts.

Devitt noted, “Our 3Q:18 topline estimate of $57.1B is in line with consensus expectations and near the high-end of the guided range ($54.0B- $57.5B). We expect the strong topline momentum to be driven by the healthy consumer spending backdrop, increased adoption / spending among larger cloud enterprise customers, and recent enhancements to Amazon’s advertising products. We are forecasting AWS revenue of $6.8B (49% y/y), which is modestly above Street expectations ($6.7B) and would represent the fourth consecutive quarter of accelerating growth. The company continues to increase wallet share with existing cloud customers, and acquisition remains strong evidenced by Amazon’s healthy pipeline of new enterprise clients. We expect Other revenue, which consists largely of advertising services, to reach $2.3B (105% y/y) in 3Q, though believe there’s potential upside to our estimate given the company’s increased focus on enhancing its ad product portfolio in recent quarters.”

“With consumer sentiment and employment rates near 18-year highs and ongoing store closures in the U.S., we believe Amazon’s strong retail sales growth will continue through the balance of the year and beyond,” the analyst added.

Net-net, Devitt reiterates a Buy rating on Amazon stock, with a price target of $2,525, which implies an upside of 41% from current levels.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Scott Devitt has a yearly average return of 20.6% and a 66% success rate. Devitt has a 34.7% average return when recommending AMZN, and is ranked #56 out of 4887 analysts.

As of this writing, Amazon shares are rising nearly 7% to $1,783.

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