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.

Last Minute Thought: Buy or Sell Amazon (AMZN) Stock Before Q1’19 Earnings?


Get ready! Amazon (AMZN) reports earnings in just a few minutes..

Guidance calls for revenue of between $56 and $60 billion (year-over-year growth of 10-18%), with operating income in the range of $2.3 and $3.3 billion ($1.9 billion a year ago). Investors will also be looking for increased free cash flow, which remains a goal for Amazon and grew each quarter in 2018. And of course, non-retail performance will be paramount, as, for example, Web Services generates more than half of total company operating income, and helps the retail side continue to offer low-margin services.

Ahead of the print, SunTrust’s top analyst Youssef Squali maintains his Buy rating on Amazon stock with $2,200 price target.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Squali has a yearly average return of 22.9% and a 71% success rate. Squali has an average return of 36% when recommending AMZN and is ranked #42 out of 5,197 analysts.

Squali expects Amazon’s first quarter to be “strong.” His revenue estimate, at $59.5 billion, is in line with consensus at $59.7 and the upper end of guidance. On margins, the analyst is below consensus, at $2.86 billion vs. $3.12, and falls in the middle of guidance. Nevertheless, the analyst notes the “company has exceeded the high-end of Op Income guidance for the last 6 quarters,” so it seems he would not seem surprised if this happens this week.

Amazon’s retail business is its primary driver of revenue, with Squali expecting “solid” growth in the US, with “some uncertainty with Int’l.” In the US and across the world, though the majority of retail dollars is still spent in-person, the majority of ecommerce dollars is being spent on Amazon — as ecommerce spending is rising significantly higher than that of the general retail sector, Amazon is expected to see continued growth in its retail segment.

One area where Squali will focus is in advertising: “While we do not model out advertising revenues separately, we believe growth will continue to be robust. According to Kenshoo, same-advertiser spending on ecommerce channel ads (which is mostly Amazon) was up 83% Y/Y in 1Q,” Squali opined.

RBC’s top analyst Mark Mahaney largely seems to echo Squali’s positive sentiment on Amazon stock, maintaining an Outperform rating and $2,300 price target.

Mahaney stated, “Based on intra-quarter data points, our channel checks, and our model sensitivity work, we think Street estimates are reasonable for the March quarter, with the potential for modest upside on the Operating Income line. In terms of the June quarter outlook, we view Street assumptions (18% Y/Y Revenue growth and 6.7% Op. Margin) as reasonable and most likely bracketable.”

All in all, there is little arguing that Amazon is loved on Wall Street. TipRanks analysis of 37 analyst ratings on the stock shows a Strong Buy consensus, with 36 analysts recommending Buy and one saying Hold. There is a $2,124.28 average price target on the stock, representing a 12% upside. (Click here to see Amazon’s ratings and price targets on TipRanks)

 

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