By: Brendan Gilmartin, VP Research & Content
Amazon.com (NASDAQ:AMZN) is scheduled to report 2Q 2013 earnings after the closing bell on Thursday, July 25. 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 2Q 2013 period back in its April (1Q) earnings release:
- Net sales are expected to be $14.5 bln and $16.2 bln, or to grow between 13% and 26% compared with second quarter 2012. The current consensus is toward the high end of this range at $15.74 bln. (Source: Yahoo! Finance!). Revenue is a critical measure for Amazon and often dictates the after-hours trading action, given the wide breadth of analyst and company estimates.
- Operating income (loss) is expected to be between a loss of -$(340) mln and $10 mln, compared with $107 mln in the prior-year period. According to Zacks Investment Research, the consensus estimate is $45.3 mln for reported operating income.
Amazon is expected to post Earnings Per Share (EPS) of $0.06 (range is -$0.16 to $0.36), versus $0.01 in the prior year. (Source: Yahoo! Finance). Amazon usually provides a value for the measure Earnings Per Share that most often compares with consensus estimates.
Forward guidance is a critical measure for Amazon and usually impacts the ensuing trading activity. Current estimates (3Q 2013):
Revenues: $16.98 bln. If the low end of revenue forecast exceeds this estimate, shares could rally to new all-time highs.
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.
07/10: According to a post on StreetInsider.com, Citigroup started coverage on Amazon.com with a Buy rating and a price target of $340. The firm suggests that Amazon's retail business trades at a multiple in-line with traditional retailers and investors may be underestimating several of its growth areas.
06/24: Piper Jaffray reiterated an Overweight rating on Amazon with a price target of $325, according to a post on Benzinga.com. As part of the report, the firm pointed out Amazon's success in streaming online video and competitiveness with Netflix (NASDAQ:NFLX).
Amazon recently broke out to an all-time high of $309.39 (7/16) before stalling out on lower volume ahead of the 2Q earnings release. At these levels, Amazon is vulnerable to any missteps, and could test initial support at $300, with downside risk to $285. Should Amazon deliver a convincing beat on EPS, revenue, and operating metrics, look for shares to push through the aforementioned peak near $310, with no technical resistance beyond that level. (Chart courtesy of StockCharts.com).
Amazon shares are just off the recent all-time high ($309.39) following a 20% run-up since early May, 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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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