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By: Brendan Gilmartin

Amazon.com (NASDAQ:AMZN) is scheduled to report 4Q 2012 earnings after the closing bell on Tuesday, January 29. Results are typically released between 4:01 and 4:10 p.m. EST. A conference call will follow at 5:00 p.m. EST.

Outliers & Strategy

Amazon provided the following guidance for the 4Q 2012 period back in its October (3Q) earnings release:

  • Net sales are expected to be between $20.25 bln and $22.75 bln, or to grow between 16% and 31% compared with fourth quarter 2011. The current consensus is toward the high end of this range at $22.27 bln. (Source: Yahoo! Finance!). Revenue is a critical measure for Amazon and often dictates the after-hours trading action, given the wide breadth of analyst and company estimates.
  • Operating income (loss) is expected to be between a loss of -$(490) mln and $310 mln, compared with $260 mln in the prior-year period.


Amazon is expected to post earnings of $0.28 per share (range is -$0.38 to $0.82), down from $0.38 in the prior year. (Source: Yahoo! Finance)

Forward guidance is a critical measure for Amazon and usually impacts the ensuing trading activity. Current estimates (1Q 2013):

  • Revenues: $16.84 bln. If the low end of revenue forecast exceeds this estimate, shares could rally to new all-time highs.


While much of the attention centers on Amazon's retail operations, an overlooked part of its business are the hosted web services & cloud-computing segments that are contributing meaningful revenue.

Recent News

  • 01/18: Pacific Crest upgraded Amazon from Sector Perform to Outperform with a price target of $346, according to a report on Barron's Online. The firm cited a growing lead in retail commerce, increased market share, and increased prevalence of online purchasing. The firm also noted that Amazon is a dominant player in mobile commerce.
  • 01/09: Goldman Sachs assumed coverage on Amazon with a Buy rating and a price target of $315, according to StreetInsider.com. The firm cited strong growth in ecommerce and consumer demographics.
  • 01/07: Morgan Stanley's upgraded Amazon from Equal Weight to Overweight with a $325 price target, according to Barron's Online. The firm cited the expected share of the global e-commerce market Amazon will likely obtain in coming years.
  • 01/02: Amazon said 2012 was a record-breaking holiday season for businesses selling on its platform.


Technical Review

Amazon shares recently broke out to an all-time high of $284.72, pushing through previous resistance at $275. Today's (1/28) pullback in the wake of last Friday's advance is a bearish candlestick signal ahead of earnings, while the Relative Strength Index is coming off the overbought 70-level. Should earnings fail to impress, look for soft support at $275, with downside risk to $260, followed by the 50-Day SMA near $255. The recent high near $285 would be the first point of resistance on an upside surprise. (Chart courtesy of StockCharts.com).

(click to enlarge)

Summary

Amazon shares recently broke out to all-time highs on evidence of a strong holiday shopping season, an increasingly dominant position in e-commerce, a pickup in the global economy, and a strategic push into mobile. Against this positive backdrop, Amazon is vulnerable to any missteps. Note that in past releases, the tendency has been to sell-off sharply on the initial report, only to rally in the ensuing session.

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Source: Amazon.com Is Poised To Deliver Strong 4Q Results; Shares Could Reach $300