Amazon Earnings Preview » What’s Next in the Stock Market for AMZN Stock?
Amazon’s Prime Day and continued strength in subscriptions, advertising and cloud computing will all help drive sales growth, but earnings remain under pressure. How will AMZN stock react to the stock market in response to Amazon’s results?
When will Amazon release its third quarter results?
Amazon will announce its third-quarter results after the close of business on Thursday, October 27. The management will hold a conference call on the same day at 14.30 PT.
Consensus on Amazon’s third quarter earnings
Amazon said net revenue would be between $125.0 billion and $130.0 billion in the third quarter and gave itself a narrow profit after saying operating profit would be in the range between breakeven and $3.5 billion.
Wall Street expects Amazon to realize a 15% year-over-year rise in net sales to $127.64 billion in the third quarter. Operating profit is expected to fall 36% to $3.12 billion, and diluted EPS is expected to reach $0.28, down 11% from a year ago.
Snapshot of Amazon’s third quarter earnings
Amazon continues to forge ahead, posting sustained levels of sales growth despite the fragile outlook for the economy and signs of a slowdown in consumer spending. In fact, the double-digit revenue growth forecast for this quarter will be more than double the rate we’ve seen in the previous two. Part of that will be because this quarter gets easier as the difficult comparisons spawned by the demand boom during the pandemic begin to unravel, leading to faster sales growth and a milder decline in earnings.
Another reason for the faster revenue growth is that its Prime Day sale was held in the third quarter, while last year it was held in the second. This is expected to contribute to an 8.1% increase in sales of its core e-commerce business and a 17% increase in revenue from the range of services it provides to third-party sellers on its platform.
Its subscription services, backed by Prime, are expected to remain strong, and Wall Street expects a 13% increase in revenue this quarter. Prime appears to be a big advantage in keeping customers in its flywheel strategy and encouraging members to continue shopping on the platform even if they spend less elsewhere.
Notably, Amazon recently held its Prime Early Access sale ahead of November’s Black Friday and Cyber Monday events, all of which are expected to come into play in Q4. However, the expected boost from these additional sales is not expected to be as large in the fourth quarter as the Prime Day sales will be in the third. Initial analysis suggests the event did not deliver the blockbuster numbers Amazon had hoped for.
“This Prime Day [Early Access] mostly seemed like another day at Amazon,” said data analytics firm Klover CEO Brian Mandelbaum. He added that households spent about 40% less on this event than on Prime Day in July. Separate data from research firm Numerator indicates the average basket fell to $46.68 from over $60 during the summer event.
Elsewhere, Amazon’s relatively small but fast-growing advertising business is expected to see a 24% rise in revenue in the third quarter, which would be welcome given the weakness seen by the industry’s biggest players, particularly in growing social media companies. stall to record lows.
Meanwhile, Amazon Web Services, the world’s largest cloud computing company and the jewel in the company’s crown as it generates the bulk of its profits, is expected to post another impressive 30% growth from its sales this quarter to $21.0 billion. He will again be almost solely responsible for Amazon’s profits, as analysts estimate the unit’s operating profit will rise 25% to $6.1 billion, before being dragged down by its other loss-making businesses.
Regionally, North America is expected to drive revenue growth in the quarter, with revenue in the region expected to grow more than 17%, helping to offset the 0.5% preliminary growth expected in its international division.
Revenue may continue to grow, but earnings are under pressure as Amazon struggles with rising costs, which are expected to be 18% higher in the third quarter than a year ago, and the strength of an unfavorable dollar. However, it is working to limit the costs it can control and said costs will be about $1.5 billion lower this quarter than last, with a particular focus on its fulfillment network.
Yet Amazon has long been willing to sacrifice profitability for growth and gain market share in order to reap profits later. We’ve seen operating profit fall dramatically since it peaked in early 2021, although Wall Street remains hopeful that it can start to rise again as we head into the busy holiday shopping season in the fourth quarter and that the third will be the bottom.
The outlook for the busy holiday shopping season in the fourth quarter will prove influential. Wall Street expects Amazon to target net sales of $155.5 billion and operating profit of $4.7 billion in the final three months of 2022.
What’s Next in the Stock Market for AMZN Shares?
Amazon shares have returned to the stock market since closing at a three-month low on October 14, with AMZN stock currently testing the 100-day moving average and its highest level in nearly three weeks today.
AMZN stock, if it maintains its momentum on the exchange, could continue to climb towards $126 before facing its next test, as this level proved a difficult ceiling to breach between May and July before resurfacing up as a support level in September. . A break above here would put $137.30 in play, in line with the bottom of the first four months of 2022.
Notably, the 52 brokers covering Amazon remain extremely bullish on the stock after this year’s strong selloff, with an average price target of $167, suggesting the stock could rally nearly 40% from current levels and return to a , which has not been seen since last April.
Any renewed pressure could send Amazon shares back to a three-month low of $106.90, which it needs to hold to avoid bringing back $102 — the two-year low that emerged as a floor in May and June . to see Amazon shares fall below $100 for the first time in the stock market since April 2020.
By Joshua Warner, FOREX.com » Official Site
Disclaimer: The information and statements contained in this report are for general information only and do not constitute an offer or solicitation to buy or sell foreign exchange contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness and assumes no responsibility for any direct, indirect or consequential damages that may arise as a result of any reliance on such information.