We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Amazon's (AMZN) Q3 Earnings to be Hurt by Heavy Investments
Read MoreHide Full Article
Amazon.com (AMZN - Free Report) will report third-quarter 2017 earnings on Oct 26 after the bell.
We expect the company’s earnings to be hurt (as usual) by continuous heavy investments in fulfillment centers, TV shows and movies, AWS, acquisitions, India expansion and what not. It’s looking for a second headquarter in North America and plans to invest $5 billion for it. Amazon’s global margins are likely to be under pressure at least for a few years.
However, revenues are expected to improve on strong Prime Day’ 17 sales, the integration of Whole Foods, a solid loyalty system in Prime and the Fulfillment by Amazon (FBA) strategy.
We observe that Amazon shares have gained 29.2% year to date, underperforming the 47.9% rally of the industry it belongs to.
Factors to Consider
AWS: It's a multi-billion-dollar business and the cash cow for Amazon. It has millions of customers and generates much higher margins than retail. It is the key driver of Amazon’s profitability.
We remain optimistic about the functionality; partner ecosystem and the experience AWS offers and believe this will lead to continued customer wins. If AWS continues to witness the same kind of success, investors can hope for significant growth this time as well.
Prime: Amazon keeps its retail business very hard to beat on price, choice, and convenience with the help of a solid loyalty system in Prime and its FBA strategy. The company continues to push advantages exclusively to Prime members, thus encouraging them to spend more on Amazon. It is focused on building video content, primarily for Prime subscribers because the growth prospects in that market are considerable.
Prime is now widely available and generates increased sales for Amazon. Prime Now, the company’s super-fast delivery service, is expanding rapidly in the United States
IoT: Alexa powered Echo devices are going great guns and help the company sell products and services. Alexa has already been integrated into a host of everyday devices for the digital home and there are agreements for more.
The company is racing to build an ecosystem around Alexa to make sure that it stays way ahead of Alphabet (GOOGL - Free Report) subsidiary Google's smart assistant, Apple’s Siri and Microsoft's Cortana.
Grocery Push: Amazon has already gone the brick-and-mortar way with books and is treading the same path with other merchandise as well. Its acquisition of Whole Foods indicates that it is targeting the considerably large customer base that still prefers to shop at physical stores.
Amazon Go, the no-queue-checkout-counter grocery store, is going to be a boon for customers who are too worn out to stand in long lines at physical cash counters or are baffled by complicated self-checking counters. It has the ability to completely shatter the traditional brick-and-mortar convenience store setup.
International Expansion: The company has been expanding Prime internationally to strengthen its foothold in international markets and create a launch pad for its other business. It could complement the company’s current expansion efforts such as investments (in India) and acquisitions (like that of Souq.com).
Guidance: In the third quarter, management expects revenues to include a $125 million or 40 bps negative FX impact and come in around $39.25–41.75 billion. Operating income is expected to come in at approximately ($400) million–$300 million.
What Our Model Says
Amazon has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of -1,219.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or #5 are best avoided especially if they have a negative Earnings ESP.
Bottom Line
If we delve deeper into Amazon’s key investment areas, we see a futuristic approach. Amazon’s long history of execution, growing focus on innovation, technological prowess and huge cash balance not only give it the flexibility to pursue growth in any area that exhibits true potential but also to create value for investors.
Amazon has never hesitated to sacrifice margins to pursue its long-term objectives, bringing more customers under its umbrella and giving them reasons to stay.
Stocks to Consider
Here are some stocks that you may want to consider as our model shows these have the right combination of elements to deliver a positive earnings surprise:
Extreme Networks, Inc., (EXTR - Free Report) with an Earnings ESP of +9.75% and a Zacks Rank #3.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Image: Bigstock
Amazon's (AMZN) Q3 Earnings to be Hurt by Heavy Investments
Amazon.com (AMZN - Free Report) will report third-quarter 2017 earnings on Oct 26 after the bell.
We expect the company’s earnings to be hurt (as usual) by continuous heavy investments in fulfillment centers, TV shows and movies, AWS, acquisitions, India expansion and what not. It’s looking for a second headquarter in North America and plans to invest $5 billion for it. Amazon’s global margins are likely to be under pressure at least for a few years.
However, revenues are expected to improve on strong Prime Day’ 17 sales, the integration of Whole Foods, a solid loyalty system in Prime and the Fulfillment by Amazon (FBA) strategy.
Amazon.com, Inc. Revenue (TTM) | Amazon.com, Inc. Quote
We observe that Amazon shares have gained 29.2% year to date, underperforming the 47.9% rally of the industry it belongs to.
Factors to Consider
AWS: It's a multi-billion-dollar business and the cash cow for Amazon. It has millions of customers and generates much higher margins than retail. It is the key driver of Amazon’s profitability.
We remain optimistic about the functionality; partner ecosystem and the experience AWS offers and believe this will lead to continued customer wins. If AWS continues to witness the same kind of success, investors can hope for significant growth this time as well.
Prime: Amazon keeps its retail business very hard to beat on price, choice, and convenience with the help of a solid loyalty system in Prime and its FBA strategy. The company continues to push advantages exclusively to Prime members, thus encouraging them to spend more on Amazon. It is focused on building video content, primarily for Prime subscribers because the growth prospects in that market are considerable.
Prime is now widely available and generates increased sales for Amazon. Prime Now, the company’s super-fast delivery service, is expanding rapidly in the United States
IoT: Alexa powered Echo devices are going great guns and help the company sell products and services. Alexa has already been integrated into a host of everyday devices for the digital home and there are agreements for more.
The company is racing to build an ecosystem around Alexa to make sure that it stays way ahead of Alphabet (GOOGL - Free Report) subsidiary Google's smart assistant, Apple’s Siri and Microsoft's Cortana.
Grocery Push: Amazon has already gone the brick-and-mortar way with books and is treading the same path with other merchandise as well. Its acquisition of Whole Foods indicates that it is targeting the considerably large customer base that still prefers to shop at physical stores.
Amazon Go, the no-queue-checkout-counter grocery store, is going to be a boon for customers who are too worn out to stand in long lines at physical cash counters or are baffled by complicated self-checking counters. It has the ability to completely shatter the traditional brick-and-mortar convenience store setup.
International Expansion: The company has been expanding Prime internationally to strengthen its foothold in international markets and create a launch pad for its other business. It could complement the company’s current expansion efforts such as investments (in India) and acquisitions (like that of Souq.com).
Guidance: In the third quarter, management expects revenues to include a $125 million or 40 bps negative FX impact and come in around $39.25–41.75 billion. Operating income is expected to come in at approximately ($400) million–$300 million.
What Our Model Says
Amazon has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of -1,219.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or #5 are best avoided especially if they have a negative Earnings ESP.
Bottom Line
If we delve deeper into Amazon’s key investment areas, we see a futuristic approach. Amazon’s long history of execution, growing focus on innovation, technological prowess and huge cash balance not only give it the flexibility to pursue growth in any area that exhibits true potential but also to create value for investors.
Amazon has never hesitated to sacrifice margins to pursue its long-term objectives, bringing more customers under its umbrella and giving them reasons to stay.
Stocks to Consider
Here are some stocks that you may want to consider as our model shows these have the right combination of elements to deliver a positive earnings surprise:
Applied Materials, Inc. (AMAT - Free Report) , with an Earnings ESP of +0.37% and Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Extreme Networks, Inc., (EXTR - Free Report) with an Earnings ESP of +9.75% and a Zacks Rank #3.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>