By Brendan Gilmartin
Overview
Amazon.com (AMZN) is scheduled to report 4Q 2011 earnings after the closing bell on Tuesday, January 31. 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 2011 period back in its October earnings release:
- Net sales are expected to be between $16.45 billion and $18.65 billion, or to grow between 27% and 44% compared with fourth quarter 2010. The current consensus is $18.2 billion, the high end of the range. (Source: Yahoo! Finance!)
- Operating income (loss) is expected to be between $(200) million and $250 million, or between 142% decline and 47% decline compared with fourth quarter 2010.
- Forward guidance is a critical measure for Amazon and usually impacts the ensuing trading activity. Current estimates (1Q 2012):
- Revenues: $13.37 bln.
- Amazon usually provides a value for the measure Earnings Per Share that most often compares with consensus estimates. Revenues are also crucial.
- 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.
- Amazon is expected to earn $0.19 per share (range is -$0.26 to $0.88), down from $0.91 in the prior year period.
Recent News
- 01/26: According to Trefis.com, strong sales of the Kindle e-reader and Fire tablet could contribute to strong 4Q 2011 earnings. The Trefis price target is $233.
- 12/29: JP Morgan reiterated an Overweight rating on Amazon.com, according to a post on Barron's, asserting that the company's sales results could exceed figures based on data from ecommerce analytics provider comScore.
- 12/29: Goldman Sachs reiterated a Neutral rating on Amazon.com, amid concerns over 4Q sales, according to Barron's.
- 12/28: comScore announced that, for the holiday season-to-date, $35.3 billion has been spent online, a 115% improvement over the same period a year ago. This report triggered concerns that Amazon would not meet its 4Q sales goals.
- 12/29: Amazon.com announced that 2011 was the best holiday ever for the Kindle family as customers purchased "millions of Kindle Fires and millions of Kindle e-readers." The company also noted that 2011 was a record-breaking holiday season for businesses that sell on Amazon.
Technical Review
Amazon.com shares are off more than 20% from the October highs near $250. Amazon's shares recently overtook a key resistance level near $190 and look poised for a run back toward the 200-Day SMA just above $200. This would represent the first time Amazon has traded above the 200-Day since late November. From that level, there is room up toward $220. Conversely, prior resistance at $190 is now support, followed by $185 and $175. (Chart courtesy of StockCharts.com).
(Click to enlarge)
Summary
Amazon.com shares are up more than 11% YTD amid expectations for a strong earnings release, based on strong sales of the Kindle e-reader and Fire tablet and record-breaking holiday season for businesses that sell on Amazon. However, a recent report from comScore hinted that online holiday sales through Christmas called into question Amazon's ability to top its sales forecast provided in October. Valuation is also quite rich, suggesting that any missteps could have negative consequences for Amazon shares.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
DISCLAIMER: By using this report, you acknowledge that Selerity, Inc. is in no way liable for losses or gains arising out of commentary, analysis, and or data in this report. Your investment decisions and recommendations are made entirely at your discretion. Selerity does not own securities in companies that they write about, is not an investment adviser, and the content contained herein is not an endorsement to buy or sell any securities. No content published as part of this report constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person.
