Amazon analysts upbeat on upcoming results: Earnings preview
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Amazon.com (NASDAQ:AMZN) is set to report second-quarter earnings on Thursday, with most analysts optimistic that results will beat estimates.
The ecommerce retailer is expected to report EPS of $0.35 and revenue of $131.6B for the second quarter. Operating income is expected at $4.7B, and a gross margin rate of 46.5%. The AWS business is seen generating revenue of $21.7B during the quarter, which would represent a deceleration in growth to +10% year-over-year from +16% in Q1.
During the earnings call, Amazon (AMZN) is expected to issue its outlook for the full year. Investors will also likely be eyeing discussion of AI innovation, healthcare-related opportunities and costs.
The behemoth ecommerce retailer is reporting quarterly results on the heels of Prime Day in July, which will be included in the companyâs third quarter report. AMZN noted that July 11 was the single largest sales day in its history and Prime members purchased more than 375M items worldwide and saved more than $2.5B, also a record.
Credit Suisse: Outperform
Credit Suisse increased its price target on the ecommerce retailer ahead of the print, to $176 from $142, saying, âAMZN shares remain our favorite idea.â
âWe maintain our Outperform rating, with the thesis based on the following: 1) e- commerce segment operating margin expansion as it grows into its larger infrastructure, 2) optionality for faster-than-expected FCF growth vis-Ã -vis its advertising segment, and 3) upward bias to AWS revenue forecasts and likely more moderate deceleration path,â Credit Suisse said.
Cowen: Outperform
Cowen analysts were also upbeat on AMZN, maintaining their Outperform and expecting a beat on revenue and operating income.
The firm expects revenue of $132.8B for the second quarter driven by ecommerce revenue, and operating income margins up to 4.2% from 2.4% a year earlier.
âAmazon has several drivers that should yield robust global revenue growth with rising margins the next several years,â including B2C ecommerce market share gains, significant opportunity in existing and newer international markets like India, Mexico and Australia and AWS tailwinds.
Seeking Alpha analyst Jamie Galvin: Buy
Amazon had a year to forget in 2022, Galvin said, with shares tumbling 40% as the company struggled against inflation and a faltering economy.
Still, Galvin said, âThe long-term story remains very attractive, with a potential near-term boost from margins recovering across the rest of Amazon's business lines.â
âAmazon has exceeded the top end of its revenue guidance for the past two quarters - so don't be surprised if it happens again,â Galvin wrote, noting that regardless, investorsâs focus is usually on the future and therefore on guidance for Q3. Analysts estimate revenue of $138.2B in Q3.
Galvin points to the disappointment that AWS has lost its sparkle and may continue to unimpress.
âThe positive news for Amazon is that most things should be getting better, rather than worse, over the next 12 months,â Galvin said.
DA Davidson: Buy
DA Davidson likes AMZNâs âmore aggressively managing expenses,â but it does have some pause with changing strategies.
âWhile we appreciate management's surgical approach, we are monitoring the potential for it to result in slower future e-commerce sales growth,â DA Davidson analysts said. âThe headline may read that Amazon is managing expenses by cutting 27K Amazonians and slowing expansion of Amazon Fresh, but there is much more to the story.â
The firm noted as examples that having UPS pick up returns was once free and now costs $7.99. Additionally, during Prime Day, AMZN offered an incremental 1% cash back in exchange for waiting longer to receive orders.
âWhile consolidating shipments should have a positive impact on costs and margins, we are concerned about the potential sales implications.â
âFor example, we believe there is something to be said about the experience of having an Amazon-branded delivery vehicle show up at your house EVERY day. Having one show up once a week or twice is not the same. Lastly, we would point out that it goes against one of Amazon's reasons to expand its grocery effort, which was to INCREASE customer frequency.â
Jefferies: Buy
Jefferies cited AWS stabilization and continued improvements in profitability as reasons for being bullish on the stock.
âShares are attractive at ~14x FY24E EBITDA, a ~25% discount to the 10-yr avg of 18.5x, and we believe visibility into an AWS acceleration will drive shares,â Jefferies analysts said. âWe will be listening for any color on AWS July growth as a potential indicator for an upcoming AWS acceleration.â
The stock has 37 Strong Buy ratings from Wall Street analysts, 13 Buys, four Holds and one Sell.
AMZN is down 4.2% over the past 12 months, and up 50% in 2023.
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