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Summary

  • ChannelAdvisor reported June 2014 "same-store sales".
  • These imply growth acceleration for Amazon.com in Q2 2014.
  • Even taking into account the ebook accounting change, these seem to imply a beat on revenue growth.

ChannelAdvisor (NYSE:ECOM) has reported "same-store sales" for June 2014. This is how things looked for Amazon.com (NASDAQ:AMZN):

Amazon - Amazon's June SSS came in at 34.4%, an increase compared to May's 28.1% . The Amazon Fire Phone was announced in June and could have caused some knock-on effects. We have Amazon details further down in the report.

These are very powerful numbers, along with April and May they represent an 8.8% acceleration from Q1 2014. At the same time, Amazon.com's Q2 2014 consensus revenue growth stands at +23%, the same as Amazon.com achieved in Q1 2014. As we'll see, this has positive implications.

Modeling Q2 2014 revenues, uncertainty beckons

I've long modeled AMZN's revenues by using a correlation between what's reported by ChannelAdvisor, and what AMZN ultimately reports for the quarter. During the last 4 quarters, this relationship slowly broke down as the ebook accounting change flowed through Amazon.com's revenues.

This means that the present quarter is more of a guess than it has ever been. Q2 2014 is the first quarter where the base quarter one year ago already includes some of the effect from the ebook change. Accordingly, for any given level of ChannelAdvisor reported data, the level of revenue growth, which AMZN will ultimately report will now be lower. Whereas in the last few quarters the relationship had evolved towards 1:1 from around 1.5:1 originally (growth reported by CA:growth reported by AMZN), in this quarter, I'd expect this ratio to again favor ChannelAdvisor. But I have precious little data to help me answering the question of "by how much?"

Either way, up to a ratio of 1.25:1 or so, ChannelAdvisor's numbers were so strong that they imply a beat on the revenue growth number. So, I'd expect Amazon.com to report at least +24% year-on-year revenue growth versus the +23% expectations. And this means Amazon.com is likely to beat revenue expectations this quarter.

I actually wonder if there's any effect leading to this re-acceleration in growth, which has been long in coming. Perhaps, along with many other measures Amazon.com is taking to shore up earnings, Amazon.com is also letting some of its 1P (first party) sales go to 3P (third parties)? It sure seems like it. There's obviously at least one effect leaning that way: 3P sales pay no sales tax, whereas 1P do. Perhaps the Hachette affair is also leading some 1P to 3P substitution?

Conclusion

The numbers reported by ChannelAdvisor seem to indicate Amazon.com will beat revenue growth expectations for Q2 2014. They're strong and show significant acceleration in the latest quarter. Enough acceleration to actually compensate for the partial disappearance of the ebook accounting change effect, which is surprising.

The short thesis on Amazon.com is not dependent upon a single quarter's sales. It depends mostly on Amazon.com's structural lack of profitability. Yet, this datapoint is likely to be taken as positive by the market in the short term.

Source: Update: Amazon.com Seems Likely To Beat Q2 2014 Revenue Consensus