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B. Gilmartin

Amazon.com (NASDAQ:AMZN) is scheduled to report 3Q 2013 earnings after the closing bell on Thursday, October 24. 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 3Q 2013 period back in its July (2Q) earnings release:

  • Net sales are expected to be between $15.45 bln and $17.15 bln, up 12% to 24% compared with third quarter 2012. The current consensus is toward the high end of this range at $16.76 bln. (Source: Yahoo! Finance!).
  • Operating loss is expected to range from -$(440) mln and -$(65 mln). According to Zacks Investment Research, the consensus estimate is -$(48.8) mln for reported operating income.
  • Amazon is expected to post Earnings Per Share of -$(0.09) (range is -$(0.32) to $0.20). (Source: Yahoo! Finance). Amazon usually provides a value for the measure Earnings Per Share (NYSEARCA:EPS) that most often compares with consensus estimates.

Forward guidance is a critical measure for Amazon and usually impacts the ensuing trading activity. Current estimates (4Q 2013):

  • Revenues: $25.89 bln. If the low end of revenue forecast exceeds this estimate, shares could rally to fresh all-time highs. The outlook is also expected to garner close scrutiny as it reflects expectations entering the holiday shopping season.

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

10/18: UBS upgraded Amazon.com from Neutral to Buy and raised the price target from $305 to $385, according to a post on StreetInsider.com. The firm cited the expansion of the Kindle © ecosystem, a strong advertising platform, and pickup in revenue growth in the fourth quarter, evidenced by trend in the video game space, increased hiring, and better

10/08: According to a report on Barron's Online, Susquehanna Financial Group is Positive on Amazon ahead expectations for a solid 3Q earnings release. The firm sees improving margins and 22% revenue growth in the crucial 4Q. The price target is $370.

Technical Review

Amazon recently broke out to an all-time high of $337.11 (10/22) ahead of the 3Q earnings release. At these levels, Amazon is vulnerable to any missteps, and could test initial support at $320, with downside risk to $300. Should Amazon deliver a convincing beat on EPS, revenue, and operating metrics, look for shares to push through the aforementioned peak near $337, with no technical resistance beyond that level. (Chart courtesy of StockCharts.com).

Summary

Amazon shares are just off the recent all-time high ($337.11) following an 18% run-up since early September, 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: Earnings Preview: Amazon.com Q3 2013