With One Day to Go Before Amazon (AMZN) Earnings, this Bull Weighs in on the Stock

Amazon (AMZN) is just one click away from releasing its third-quarter earnings report. Wedbush analyst Michael Pachter shares his estimates just ahead of the October 25th print. Pachter reiterates AMZN stock an Outperform with a price target of $2,100, which shows an upside of 15% from current share price. (To watch Pachter’s track record, click here)

Pachter suggests Amazon can up earnings over the long term by growing spending more slowly than revenues. Other positives for Amazon include having a range of services that are doing well including the Whole Foods Market, Amazon Web Services, Fulfillment by Amazon and ad revenue. Prime is actually the service seeing the most amount of growth. This quarter will reveal how earnings were affected by the increase in the price of Prime subscriptions.

“Our estimates are for revenue of $57.51 billion, operating income of $2.40 billion, and EPS of $3.77, vs. consensus of $57.10 billion, $2.16 billion, and $3.12, and guidance of $54.0 – 57.5 billion and $1.4 – 2.4 billion. Excluding incremental physical stores revenue (Whole Foods Market), year-over-year revenue growth in Q1 and Q2 would have been $11.07 billion and $10.62 billion, with the guided Q3 range at $7.16 – 10.66 billion assuming an estimated $3.1 billion in y-o-y growth for physical stores. Revenue growth above the high-end of the range is likely, as we estimate that Prime Day sales (based on gross merchandise value) were up by at least 33% y-o-y to $4.2 billion, although the actual figure may have been higher. Amazon Web Services has seen three straight quarters of accelerating y-o-y percentage revenue growth, with Q2 at 48.9% and $2.01 billion,” Pachter said.

Pachter looks to trends from 2017, noting earnings in the fourth quarter were more robust than any in Q1 – Q3 of that same year. He anticipates winter sales to be a driving force behind upcoming earnings in 2018.  The analyst forecasts the e-commerce company to come close to $72 billion dollars in revenue for Q4, which would offer a record-breaking holiday season for AMZN. Pachter believes this could allow Amazon to ultimately deliver better-than-expected profits.

Pachter isn’t alone in assuming good earnings for Amazon. Out of 41 analysts surveyed by TipRanks just in the last three months, 40 issue a Buy rating on the stock, with only one suggesting a Hold. With a consensus price target of $2,198.86, these analysts believe the stock has 24% upside ahead. (See AMZN’s price targets and analyst ratings on TipRanks)

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