Will Amazon Show Renewed Momentum With Second-Quarter Earnings Report?

E-commerce giant Amazon (AMZN) is ready to report second-quarter results, with the stock down 25% since back-to-back quarterly earnings disappointed the e-commerce giant’s investors. The Amazon earnings report will arrive late Thursday.


It’s been a roller-coaster ride for Amazon ever since the pandemic struck in 2020. The company was a huge beneficiary as consumers first hunkered down and relied heavily on home delivery.

Since then, Amazon has faced plenty of pain to regain its footing. Negative aftereffects of Covid-19 severely disrupted the company’s operations. This included supply chain and worker disruptions, wage increases and higher fuel costs. Further, the war in Ukraine took its toll, as did inflation.

While all this was happening, Amazon stuck to plans for an aggressive buildout of warehouse fulfillment centers to reach its long-standing goal of widespread same-day delivery.

Amazon Earnings Bombed In First Quarter

But the company uncharacteristically fell far short of Wall Street’s forecast when it reported an unexpected first-quarter loss. Amazon stock plunged 14% in reaction to that report on April 29, its largest one-day drop since July 2006.

Amazon hit its slowest quarterly growth rate since 2001, as first-quarter revenue rose just 7%, vs. 44% growth in the year-earlier period.

The good news is Amazon’s rapid expansion of fulfillment centers is completed for now. The speed at which Amazon can now deliver packages has returned to pre-pandemic levels.

Further, Amazon stock took part in Wednesday’s rally, climbing 5.4% to close at 120.97.

Moreover, members of its Prime customer rewards program have meaningfully increased their spending since the start of the pandemic, with consistently high renewal rates.

Throughout the past two years, Amazon said after its first-quarter report, “We have seen stronger usage of Prime benefits by Prime members and a greater reliance on Amazon for their shopping and entertainment.”

Amazon Prime members account for more than half of U.S. households and number about 150 million globally.

A Light At The End Of The Tunnel?

Another bright spot has been advertising growth. In addition, labor and physical space are no longer the bottlenecks they were throughout much of 2020 and 2021.

“Is there a light at the end of the tunnel for the Amazon story?” Synovus Trust portfolio manager Dan Morgan wrote in a note to clients.

One superstar for Amazon comes via its cloud-computing unit, Amazon Web Services — known as AWS — which grew 35% in the first quarter.

“AWS is major part of the overall growth thesis for AMZN, (along with advertising and Prime subscription revenue),” Morgan wrote. “Many bears have pointed to the decelerating growth rate in AWS over the past quarters. However, with the onslaught of Covid-19, this has caused more large non-tech enterprises to reevaluate their on-premises data center architecture and accelerate their move to the public cloud.”

Expectations For Amazon Earnings

For the second quarter, analysts expect Amazon to report adjusted earnings of 12 cents a share. That’s down 84% from the year-earlier period. Wall Street sees revenue at $119 billion, up 5%. However, that becomes the fifth consecutive quarter of decelerating growth.

Analysts remain cautious.

“Revenue may fall below the midpoint of guidance (and below our estimate) due to macroeconomic challenges, currency translation and recession fears,” Wedbush analyst Michael Pachter said in his note to clients. Also, he wrote, “Incremental costs may be higher than expected, leading to profits at the low end of estimates.”

Credit Suisse analyst Stephen Ju on Tuesday lowered his price target on Amazon stock to 170 from 185. But he maintained a rating of outperform.

“We believe the potential remains for ongoing downward consensus revisions as we continue to grapple with the lack of clarity in the macro environment,” Ju wrote.

Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.


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