By Brendan Gilmartin
Amazon.com (AMZN) is scheduled to report 2Q 2012 earnings after the closing bell on Thursday, July 26. 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 2012 period back in its April earnings release:
- Net sales are expected to be between $11.9 billion and $13.3 billion, or to grow between 20% and 34% compared with second quarter 2011. The current consensus is $12.9 billion. (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 $(260) million and $40 million, or between 229% decline and 80% decline compared with second quarter 2011.
Forward guidance is a critical measure for Amazon and usually impacts the ensuing trading activity. Current estimates (3Q 2012):
- Revenues: $14.1 billion.
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 $0.02 per share (range is -$0.23 to $0.22), down from $0.41 in the prior year. (Source: Yahoo! Finance)
- 07/24: Amazon shares declined after shipping giant UPS (UPS) posted weaker than expected earnings and cut its FY2012 outlook.
- 07/23: Goldman Sachs reiterated a Buy rating on Amazon, but lowered the price target from $295 to $280, according to a post on Benzinga.com, due in part to lower 2013 revenue forecasts.
- 07/18: Rival eBay (EBAY) shares jumped to 6-year highs after posting stronger than expected 2Q earnings and a conservative outlook. The company indicated strength was attributable in part to "eBay Marketplaces' best performance in years."
- 07/11: BMO Capital initiated coverage on Amazon with a Market Perform rating and a $260 price target, according to Barron's Online. The firm expects "robust" revenue growth to offset compressed profit margins resulting from investments in expansion.
Amazon is among the better-performing names in the S&P 500, rising 30.6% YTD. Since the previous 1Q 2012 earnings release in April, however, the shares have struggled to overcome the $230-level, having failed on several attempts. That will be a key resistance area to watch following the results on Thursday. Should earnings and guidance surprise to the upside, there is upside to the 52-week high of $246.71 established last October. Conversely, support is near the 50-Day SMA at $220, with downside risk to $215 and $210. (Chart courtesy of StockCharts.com)
Amazon shares are holding up well in advance of the 2Q 2012 earnings release after the close on Thursday. The company is benefiting from growing revenues, a recently upbeat report from eBay, benefits of additional distribution centers, expansion of its hosted web services, and cost-conscious consumers seeking more competitive prices in light of the weaker market backdrop. Caveats include margin compression in light of its investment in distribution, a weak earnings report from UPS due to lower shipping rates, valuation, competition for the Kindle e-Reader, and speculation that states and the federal government are considering taxes on goods purchased over the Internet.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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