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By: Brendan Gilmartin, VP Research & Content

Amazon.com (AMZN) is scheduled to report 2Q 2013 earnings after the closing bell on Thursday, July 25. 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 2Q 2013 period back in its April (1Q) earnings release:

  • Net sales are expected to be $14.5 bln and $16.2 bln, or to grow between 13% and 26% compared with second quarter 2012. The current consensus is toward the high end of this range at $15.74 bln. (Source: Yahoo! Finance!). Revenue is a critical measure for Amazon and often dictates the after-hours trading action, given the wide breadth of analyst and company estimates.
  • Operating income (loss) is expected to be between a loss of -$(340) mln and $10 mln, compared with $107 mln in the prior-year period. According to Zacks Investment Research, the consensus estimate is $45.3 mln for reported operating income.


Amazon is expected to post Earnings Per Share (EPS) of $0.06 (range is -$0.16 to $0.36), versus $0.01 in the prior year. (Source: Yahoo! Finance). Amazon usually provides a value for the measure Earnings Per Share that most often compares with consensus estimates.

Forward guidance is a critical measure for Amazon and usually impacts the ensuing trading activity. Current estimates (3Q 2013):

Revenues: $16.98 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

07/10: According to a post on StreetInsider.com, Citigroup started coverage on Amazon.com with a Buy rating and a price target of $340. The firm suggests that Amazon's retail business trades at a multiple in-line with traditional retailers and investors may be underestimating several of its growth areas.

06/24: Piper Jaffray reiterated an Overweight rating on Amazon with a price target of $325, according to a post on Benzinga.com. As part of the report, the firm pointed out Amazon's success in streaming online video and competitiveness with Netflix (NFLX).

Technical Review

Amazon recently broke out to an all-time high of $309.39 (7/16) before stalling out on lower volume ahead of the 2Q earnings release. At these levels, Amazon is vulnerable to any missteps, and could test initial support at $300, with downside risk to $285. Should Amazon deliver a convincing beat on EPS, revenue, and operating metrics, look for shares to push through the aforementioned peak near $310, with no technical resistance beyond that level. (Chart courtesy of StockCharts.com).


(Click to enlarge)

Summary

Amazon shares are just off the recent all-time high ($309.39) following a 20% run-up since early May, thanks to an improved spending backdrop, its 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 as the Street focuses on the operating metrics (operating income & margin) and non-core retail business.

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Source: Amazon 2Q 2013 Earnings Preview