Amazon.com, Inc. (Nasdaq: AMZN) is one of several heavy hitters in the tech world reporting fourth-quarter earnings this week. Amazon will no doubt report some impressive growth numbers on Feb. 1, but market expectations are extremely high.
Wall Street analysts are expecting Amazon to report fourth-quarter earnings per share of $1.85 on revenue of $59.98 billion. Those numbers would represent 20 percent and 37 percent growth, respectively. If Amazon meets or beats revenue expectations, it would represent its largest quarterly revenue growth rate in more than two years.
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However, there are several other key growth metrics that investors will be watching closely other than the top and bottom lines. In the most recent quarter, Amazon reported Amazon Web Services cloud revenue of $4.58 billion, up 41.9 percent from a year ago. AWS margins, another part of the long-term picture for Amazon bulls, were 25.5 percent.
“AWS cloud momentum appears strong as it approaches a $20 billion run-rate on 40 percent estimated growth, but the Meltdown/Spectre vulnerabilities heighten risk to AWS margin expansion potential for 2018,” KeyBanc analyst Edward Yruma says. KeyBanc is projecting AWS revenue grew to $4.95 billion in the fourth quarter, up 40.1 percent.
Amazon investors will also be listening for important updates from management on several key initiatives. Amazon recently launched its first Amazon Go cashier-less convenience stores. The company is also expected to ramp up spending on original video content this year. Finally, Amazon has been quiet regarding the location of its second headquarters after recently narrowing the list to 20 cities.
Yruma says Amazon’s long-term strategy is on track, but the stock’s current valuation leaves little room for additional upside.
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GBH Insights head of technology research Daniel Ives says investors shouldn’t be concerned about Amazon’s aggressive spending or its stock’s steep valuation. Ives says e-commerce numbers and AWS revenue growth will likely beat consensus estimates, providing as much as 5 percent EPS upside in the fourth quarter.
“More details around the Whole Foods acquisition strategy and cross-sell opportunities, AWS strength, HQ2 timing, and margin guidance will be focus areas for investors heading into earnings and could be a swing factor on the stock in the near-term, with margins key,” Ives says.
KeyBanc has a “sector weight” rating for Amazon. GBH has a “highly attractive” rating and $1,500 price target for AMZN stock.
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Amazon.com, Inc. Earnings Preview: What to Expect from AMZN Stock originally appeared on usnews.com
