Amazon.com Inc. (NASDAQ:AMZN) is set to report FQ1 2014 earnings after the market closes on Thursday, April 24th. Amazon is a notoriously low margin electronic and online commerce company. They sell just about anything a shopper could ever want on Amazon.com, and provide a variety of other offerings including Amazon Prime and Amazon Web Services. Amazon, like Google (GOOG, GOOGL), has a history of heavily reinvesting profits back into the company, so EPS can often be difficult to estimate. During the holiday season, Amazon reported significantly lower EPS than the Street was looking for and failed to live up to the high revenue growth expectations. This quarter, Wall Street is looking for Amazon to increase EPS by 4c compared to FQ1 of last year, and for revenue to grow by 21% on a year-over-year basis. Here’s what investors are expecting on Thursday.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
(Click Above to see Estimates and Interactive Features for Amazon)
The current Wall Street consensus expectation is for Amazon to report 22c EPS and $19.455B revenue, while the current Estimize.com consensus from 73 Buy Side and Independent contributing analysts is 25c EPS and $19.601B in revenue. This quarter, the buy-side as represented by the Estimize.com community is expecting Amazon to beat the Wall Street consensus by a small but significant margin.
By tapping into a wider range of contributors, including hedge-fund analysts, asset managers, independent research shops, students, and non-professional investors, Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly, does a better job of representing the market’s actual expectations. It has been confirmed by Deutsche Bank (NYSE:DB) Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we are seeing an average difference between the two groups’ expectations.
The distribution of estimates published by analysts on the Estimize.com platform range from 59c to 78c EPS and from $20.072B to $22.250B in revenues. This quarter, we’re seeing a very wide distribution of estimates on Amazon’s EPS and a moderate range of estimates on revenue.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market could mean greater volatility post-earnings.
Over the past 4 months, the Wall Street EPS forecast fell from 52c to 22c, while the Estimize consensus declined from 43c to 25c. Meanwhile, Wall Street brought down its revenue projection from $19.715B to $19.455B, while the Estimize consensus dropped from a high of $20.045B to $19.601B. Timeliness is correlated with accuracy, and downward analyst revisions at the end of the quarter are often a bearish indicator.
The analyst with the highest estimate confidence rating this quarter is TechStockRadar, who projects 23c EPS and $19.700B in revenue. TechStockRadar is ranked 15th overall among 4,200 contributing analysts. Over the past 2 years, TechStockRadar has been more accurate than Wall Street in forecasting EPS and revenue an impressive 66% and 63% of the time, respectively, throughout 423 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research, which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, TechStockRadar is expecting Amazon to exceed expectations on sales, but report above Wall Street and below the Estimize consensus on EPS.
Amazon is rapidly growing its revenue, but continues to be held back by its thin profit margins. The e-commerce company is taking an active approach to spark profits by expanding its cloud computing through Amazon Web Services and by gobbling up top quality content for Amazon Prime Instant Video, including a huge deal with HBO that was announced on Wednesday.