Amazon Earnings: Here’s what to expect

e-commerce giant Amazon (AMZN) is set to report its second-quarter results, as the stock has fallen 25% since back-to-back quarterly results disappointed its investors. Amazon’s earnings report will arrive late Thursday.




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It’s been a roller coaster ride for Amazon since the pandemic hit in 2020. The company has been a huge beneficiary as consumers first leaned in and relied heavily on home delivery.

Since then, Amazon has had to face many difficulties to regain its footing. The negative aftermath of Covid-19 has severely disrupted the company’s operations. This included supply chain and worker disruptions, wage increases and higher fuel costs. Moreover, the war in Ukraine has taken its toll, as has inflation.

While all of this was going on, Amazon stuck to plans to aggressively build warehouse fulfillment centers to meet its longstanding goal of widespread same-day delivery.

Amazon first-quarter earnings bombardment

But the company fell uncharacteristically well below Wall Street forecasts when it reported an unexpected first-quarter loss. Amazon stock plunged 14% in response to the April 29 report, its biggest one-day drop since July 2006.

Amazon hit its slowest quarterly growth rate since 2001, with first-quarter revenue growing just 7%, down from 44% growth the previous year.

The good news is that Amazon’s rapid fulfillment center expansion is over for now. The speed at which Amazon can now deliver packages has returned to pre-pandemic levels.

Additionally, members of its Prime customer rewards program have dramatically increased spending since the pandemic began, with consistently high renewal rates.

Over the past two years, Amazon said after its first quarter report, “We have seen increased use of Prime benefits by Prime members and greater reliance on Amazon for shopping and entertainment.”

Amazon Prime members make up more than half of US households and number around 150 million worldwide.

A light at the end of the tunnel?

Another bright spot was the growth in advertising. Additionally, labor and physical space are no longer the bottlenecks they were for much of 2020 and 2021.

“Is there a light at the end of the tunnel for Amazon’s story?” Synovus Trust portfolio manager Dan Morgan wrote in a note to clients.

A superstar for Amazon comes via its cloud computing unit, Amazon Web Services – known as AWS – which grew 35% in the first quarter.

“AWS is an important part of AMZN’s overall growth thesis (along with advertising and Prime subscription revenue),” Morgan wrote. “Many bears have pointed to the deceleration in AWS’s growth rate over the past few quarters. However, with the onslaught of Covid-19, this has caused more large non-tech companies to re-evaluate their data center architecture on site and accelerate their move to the public cloud.”

Expectations for Amazon Revenue

For the second quarter, analysts expect Amazon to report adjusted earnings of 12 cents per share. This is a drop of 84% compared to the period of the previous year. Wall Street sees revenue at $119 billion, up 5%. However, this becomes the fifth consecutive quarter of slowing growth.

Analysts remain cautious.

“Revenues could fall below the midpoint of the guidance (and below our estimate) due to macroeconomic challenges, currency translation and recession fears,” Wedbush analyst Michael Pachter said in a statement. its note to customers. Also, he wrote, “additional costs may be higher than expected, resulting in profits at the bottom of estimates.”

Credit Suisse analyst Stephen Ju on Tuesday lowered his Amazon stock price target to 170 from 185. But he maintained an outperform rating.

“We believe there remains potential for downward revisions to the ongoing consensus as we continue to grapple with the lack of clarity in the macro environment,” Ju wrote.

Please follow Brian Deagon on Twitter at @IBD_BDeagon to learn more about tech stocks, analysis and financial markets.

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