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Amazon Earnings Preview

|Includes:AAPL, Amazon.com, Inc. (AMZN)
Amazon.com is scheduled to report their fourth quarter 2009 results after the market closes on Thursday, January 28th. Based on analysis from EarningsPreviews.com, Amazon is expected to report much stronger than expected quarterly results that exceed Wall Street’s consensus expectations.
 
Analyst Expectations
We are forecasting revenues of $9.10 billion and EPS of $.79. This would represent a 36% increase in revenues from last year’s $6.70 billion in the same period. The current analyst consensus estimates calls for revenues of $9.00 billion and EPS of $.72. On October 22, Amazon’s management provided fourth quarter revenue guidance of $8.125 - $9.125 billion.
 
Earnings Analysis
Amazon.com is likely the biggest winner of the resurgence in holiday spending this year. Compete analytics shows Amazon’s traffic surged 22% in the fourth quarter as shoppers flocked online to find Christmas deals. However, Amazon’s growth isn’t just being fueled by bargain hunters either. The popular Kindle e-reader continues to provide a strong growth catalyst and is seeing increasing adoption rates.
 
Amazon has established itself as the face of ecommerce and has delivered impressive growth despite the severe economic recession. While the upcoming release of Apple’s tablet may bite into Amazon’s Kindle sales, we believe the e-tailer will be able to continue leveraging the mindshare they have captured over the last decade.
 
Stock Performance
In 2009, Amazon’s stock gained a phenomenal 162% as they outperformed the Dow Jones industrial average’s 19% increase. However, the stock has fallen 6% on profit taking since the beginning of 2010.
 
Valuation
Amazon’s stock is now trading at 49x consensus 2010 EPS estimates. This is a premium to the relative valuations of their peer group. While Amazon’s stock price is admittedly expensive, the stock continues to offer a compelling growth story with Wall Street anticipating earnings growth of 37% in 2010.
 
Recommendation: Buy with an $145 price target
 


Disclosure: No Positions
Stocks: AMZN, AAPL