Amazon.com Inc. is scheduled to report fourth-quarter earnings on Thursday after the closing bell, and reveal just how strong the holiday season was for the e-commerce giant.
“We see Amazon’s Prime member growth and engagement, Echo device sales, and consumer web traffic/interest driving solid top-line trends and GMV per customer growth,” Morgan Stanley analysts wrote in a note.
Morgan Stanley is expecting the company to face a number of challenges as it continues to invest in delivery, fulfillment, digital content and other areas. Larger-than-expected investments in bricks-and mortar outlets, such as the Amazon Go store, book stores, and TV shows are highlighted as risks.
Morgan Stanley rates Amazon shares overweight with a $1,400 price target.
MKM Partners analyst Rob Sanderson says U.S. retail sales grew 5.5% in the fourth quarter, “the best holiday season in several years,” while growth in key areas abroad was spurred by growth in Prime members overseas.
MKM rates Amazon shares buy with a $1,350 price target.
RBC Capital Markets said its third annual Alexa survey shows the potential for these devices in the long-term. Analysts estimate that Amazon accounts for 20% of U.S. online retail sales, with the company’s strengths in mobile and infrastructure laying the groundwork for future gains.
Moreover, RBC’s grocery e-commerce survey shows that online grocery sales are increasing. “Of people who buy online, Amazon has about 75% share,” analysts wrote.
RBC rates Amazon shares outperform with a $1,200 price target.
Here’s what to expect:
Earnings: Amazon is expected to report earnings of $1.88, up from $1.54 last year.
Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, expects per-share earnings of $1.95.
Amazon has missed earnings estimates in two of the past five quarters.
Revenue: FactSet analysts expect sales of $59.75 billion, up from $43.74 billion last year.
Estimize expects revenue of $60.60 billion.
Analysts surveyed by FactSet, on average, expect Amazon Web Services revenue to rise nearly 41% to $4.97 billion from the year-ago quarter.
Amazon has beat FactSet revenue expectations the past three quarters.
Stock price: Amazon shares are up 30% for the last three months, and up 75% for the past 12 months.
The S&P 500 index
is up 10% for the past three months and up nearly 24% for the last year.
Of the 48 analysts who cover Amazon, 44 have buy ratings and four have hold ratings, with an average price target of $1,391.65, according to FactSet.
-AWS, or Amazon Web Services, still rules the public cloud but recently one analyst used estimates at other cloud providers like Alphabet Inc.’s
Google Cloud and Microsoft Corp.’s
Azure to find that their revenues were growing at a faster clip. Margins at AWS are still a concern.
Canaccord analyst Michael Graham, who has a buy rating and a $1,500 price target, said AWS appears to have settled into “a sustainable competitive situation” regarding Microsoft and Google, and for growth to remain high “for the foreseeable future.”
“That said,” Graham added, “we note that Azure has been growing at a much faster rate, has continued with a solid pace of announced price cuts, and anecdotally we have heard sporadic reports of IT managers more closely scrutinizing the switching costs as AWS looks relatively more expensive in some situations.”
MKM said the drag on Amazon’s margins from its capacity expansion that started in late 2016 is starting to reverse.
“We expect this trend to continue, setting up a run of strong AWS revenue and margin upside over the next few quarters,” Sanderson said.
Susquehanna Financial analyst Shyam Patil, who has a positive rating and a $1,300 price target, also expects AWS margins to be a focus but said they “are likely to be lumpy quarter-to- quarter, adding uncertainty.”
-Morgan Stanley analysts are bullish on Amazon’s advertising arm “as the company continues to drive its high margin revenue stream businesses that enable it to invest harder than ever and deliver upward revisions.”