Amazon and Alphabet are the next of the Magnificent 7 to report earnings, with the 6th February looming large for holders of AMZN, and the 4th for GOOGL.
Recent reports from Amazon have each beat on big from an earnings per share perspective, with the lowest outperformance over the past four quarters an 18% beat in March 2024. Revenue has largely come in single digit percentages above, with the exception of the June quarter that offered up a 0.52% miss.
| Reporting Period (AMZN) | EPS Actual ($) | EPS Expected ($) | Revenue Actual ($ BN) | Revenue Expected ($BN |
|---|---|---|---|---|
| Feb 6th | – | 1.52 | – | 187.28 |
| Sep '24 | 1.43 | 1.14 | 158.88 | 157.28 |
| Jun '24 | 1.26 | 1.02 | 147.98 | 148.76 |
| Mar '24 | 0.98 | 0.83 | 143.31 | 142.56 |
| Dec '23 | 1.00 | 0.80 | 169.96 | 166.26 |
For the upcoming quarter, markets are looking for an EPS of $1.52, coming against revenue of $187.28 billion. With the stock having gained 51% over the past 12 months, anything less than more of the same will likely be harshly treated by the street.
Various analysts continue to see upside, with UBS recently increasing its price target to $275 from the previous target of $264. This revision by UBS analyst Stephen Ju notably coming before earnings.
Stephen Ju's revision of Amazon's price target is based on several updated projections. One significant change involves adjustments made to Ju’s financial model for Amazon, incorporating foreign exchange rates that could impact revenue. Additionally, Ju has scaled back his projected capital expenditures (CapEx) for Amazon's e-commerce operations. It's currently estimated that Amazon's CapEx for its e-commerce business in 2025 will be about $30 billion. Furthermore, Ju forecasts that Amazon won't need to expand its fulfillment center capacity until at least 2026, which aligns with the projected gross merchandise volume (GMV) growth of approximately 10% over the next two years.
Despite these optimistic projections, Amazon is facing certain challenges. The company is engaged in a lawsuit concerning the alleged tracking of consumer movements via the Amazon Ads SDK. Furthermore, the UK's Competition and Markets Authority is considering investigating Amazon Web Services (AWS) over potential reduced competition concerns.
In its effort to consolidate growth, Amazon has entered into a transaction agreement with Ranpak Holdings, which includes a warrant for stock acquisition. This strategic move underscores Amazon's ongoing expansion and diversification efforts, and has seen Ranpak's stock price rally this week.
With anticipation building around earnings, Amazon appears to be well-positioned to maintain its trajectory despite the challenges it faces. The stock is again approaching all time highs of 241.77, and a break above would leave us in the territory of price discovery. Much will likely depend on the outlook and any guidance given as to an immediate reaction.
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