Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Prime Day Is Great, But Analysts Are Most Looking to Amazon (AMZN) Earnings


As Prime Day makes the headlines, analysts are really looking to July 25th, when the e-commerce giant is expected to release earnings.

Amazon (AMZN) has had a strong first-half to the year, with shares rising about 33% as of Tuesday. Ahead of second-quarter earnings next week, investors are hoping the company can continue with the momentum, following a strong first-quarter showing.

Wall Street is looking for 18% revenue growth (compared to 17% last quarter), with guidance calling for between 13% and 20%. On EPS, analysts are expecting nearly 10% increase compared to last year — though this will remain an important factor, as EPS shattered analyst expectations last quarter by more than 50%.

Ahead of the print, Barclays analyst Ross Sandler maintains his Outperform rating on AMZN stock, but his price target of $2,050 implies little upside from current prices. (To watch Sandler’s track record, click here)

Sandler says, “checks and data suggest a modest acceleration for retail revenue growth based on both organic acceleration and next-day shipping in several US zip codes.” The company recently announced it would begin offering one-day shipping Prime products, though this is not expected to go into effect for some time. Aside from retail, “the pace of product introductions [on AWS] and overall penetration of enterprise remain key to the growth story,” but the analyst is “modeling in a 3-point deceleration…to 39%.”

While the analyst is optimistic on revenue, he is “cautious on OI for 2Q and 2019 in general based on management’s commentary that this year will return to normal pace of investment.” For one, the company is expected to invest $800 million in Q2 for one-day delivery. Further, Sandler says, “AWS capex and headcount are likely to cause the pace of OI margin expansion to come down meaningfully in 2Q.” Overall, the analyst estimates $3.5 billion of operating income for 2Q, which may prove conservative, but Sandler believes the street’s $4.3 billion estimate for 3Q is “a bit aggressive.”

All in all, Amazon earnings remains a big event for many as the company continues to reach different markets and offer new features that many do not. Prime delivery is a prime example — the company pioneered free two-day shipping, and is now becoming even more aggressive and forcing rivals to catch up yet again. Because of its success in other segments — including AWS and logistics — Amazon is able to offer new services without significantly sacrificing profit. 

Wall Street’s confidence on the retail giant speaks for itself; AMZN has received a whopping 35 ‘buy’ ratings in the last three months, with just one ‘hold’ rating. Meanwhile, the $2,250 consensus price target suggests a potential upside of 12% from the current share price. (See AMZN’s price targets and analyst ratings on TipRanks)

 

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