Will Q1 Earnings Hold a Surprise for Amazon.com, Inc. (AMZN)? Top Analyst Answers


World’s top online retailer Amazon.com, Inc. (NASDAQ:AMZN) releases its first quarterly earnings report for the year in only 2 days, April 27. Although Stifel top analyst Scott Devitt‘s margin estimates fall below consensus, Amazon displays robust key long term potential: steady growth rate and market share gains. As such, the analyst reiterates a Buy rating on AMZN stock with an unchanged price target of $1025, which represents an upside close to 13% compared to where the shares last traded.

For the first quarter of 2017, Devitt expects the company’s revenues to hit $35.5B, above the consensus estimate of $35.3B and close to the high end of the guided range $33.25B-$35.75B. Additionally, the analyst forecasts Amazon Web Services’ (AWS) growth to match consensus of 43% year-over-year, reaching $3.67B, compared to 47% last quarter. Devitt points out AWS price cuts that occurred in December will have a full impact on this quarter. While consensus estimates for this quarter’s operating income of $895mm settles near the guided range’s high end between $250mm-$900mm, the analyst expects an operating income of $784mm.

“We recently increased our long term revenue estimates and raised our price target reflecting: (1) momentum in U.S. eCommerce sales which are benefiting from traditional retail dislocation and increased penetration of categories late to migrate online; (2) the growing Prime member base; (3) continued momentum in AWS; and (4) the emergence of non-retail business lines. In the near term we continue to believe heightened investment in strategic areas could drive margins below current expectations. We support where investment dollars are focused and maintain our positive view. We see strong likelihood of favorable outcomes from current investment and believe as the leader in two large and rapidly growing markets, Amazon has the opportunity to drive long term growth and market share gains,” confirms the analyst.

Bottom line, Devitt advises investors to overlook the short term challenges and “support[s] where the investment is focused given the strong opportunity for successful outcomes and we would be buyers on any weakness.”

According to TipRanks, a financial engine that measures and ranks analysts’ and bloggers’ performance, Scott Devitt is ranked #80 out of #4571 analysts. Devitt has a 73% success rate and generates an annual yield of 18.9%. When recommending AMZN, the analyst earns a 26.3% average profit on the stock.

TipRanks analytics show AMZN as a Strong Buy. Based on 34 analysts offering recommendations for this share, 33 issue a Buy and 1 maintains a Hold. The 12-month average price target stands at $998.42, making a nearly 10% upside from where the stock is currently trading.

 

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