Amazon Earnings Estimates Are Shrinking Ahead of the Report

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Amazon workers pull a cart of packages for delivery on July 12, 2022 in New York City.

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com will report second-quarter earnings on Thursday after the close of trading, and as outlined in this week’s cover story in Barron’s, the results could be historically bad. Amazon has shown at least modest growth in every single quarter since it went public 25 years ago; top-line growth was under 10% in only three of those 101 quarters. That includes one quarter during the 2001 internet bubble collapse, plus the last two. This one could be the worst ever.

Analysts have been slicing their earnings and sales forecasts for this quarter, the next one, and for 2023. Amazon (ticker: AMZN) previously projected revenue for the quarter between $116 billion and $121 billion, an increase of 3% to 7%. That includes a projected 2-percentage-point hit from unfavorable currency exchange rates—an estimate that is almost certainly too low given the continued appreciation of the dollar against European and Asian currencies over the last few months. Current Street consensus calls for revenue of $119.1 billion, with profits of 14 cents a share; for the September quarter, the analyst consensus calls for revenue of $127 billion and profits of 33 cents a share.

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Consensus estimates call for 2022 revenue of $520.4 billion, with 2023 revenue of $604 billion.

Oppenheimer analyst Jason Helfstein on Monday trimmed his estimates for most periods, while cutting his price target on Amazon stock to $160 from $175. But he keeps his Outperform rating on the shares.

“We are conservatively reducing second-half e-commerce estimates assuming consumer spending slows after stable summer trends,” Helfstein writes in a research note previewing the quarter.

But Helfstein remains a long-term bull, echoing the sum-of-the-parts thesis in this week’s cover story. He calculates that once you add up the value of Amazon Web Services and the company’s advertising business, the market is valueing the company’s e-commerce business, subscriptions and physical stores, including Whole Foods, at just $30 billion. “We find the valuation of this ‘stub’ highly compelling,” he writes.

In a similar move, MKM Partners analyst Rohit Kulkarni on Monday sliced ​​his target price to $165 from $180, and chopped estimates, while keeping his Buy rating on Amazon stock. He thinks the company can hit its second-quarter revenue guidance range, but he finds the Street’s third-quarter estimates to be “quite high.” His new model calls for third-quarter revenue of $122 billion, 2022 revenue of $512 billion, and 2023 revenue of $590 billion.

Kulkarni sees some potential near-term softness in AWS demand, given the company’s usage-based pricing model—he contends the top 20 customers at AWS include Netflix ( NFLX ), Snap ( SNAP ), Spotify Technology ( SPOT ), Pinterest ( PINS ) , and Meta Platforms ( META ), all of which are struggling in the current environment.

“We are cautious heading into Q2 earnings,” he writes, but adds that as the company laps its “epic” investment cycle in 2020 and 2021, combined with an expected acceleration in revenue, he thinks the Street is underestimating the company’s free-cash -flow potential in 2023 and 2024.

On Monday, Amazon stock is 1% lower at $121.09.

Write to Eric J. Savitz at [email protected]


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