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Amazon (AMZN) Q1 Earnings to Benefit from Robust Prime & AWS
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Amazon (AMZN - Free Report) is slated to report first-quarter 2018 earnings on Apr 26.
The company delivered a massive beat in fourth-quarter 2017. Adjusted earnings of $2.16 per share outpaced the Zacks Consensus Estimate by 31 cents.
Net sales of $60.45 billion comfortably surpassed the Zacks Consensus Estimate of $59.98 billion. The figure surged 38.2% year over year and was toward the high end of management’s guided range of $56.0-$60.5 billion.
The Zacks Consensus Estimate for first-quarter 2018 earnings and revenues are currently pegged at $1.22 and $50.16 billion, respectively.
Amazon keeps its retail business very hard to beat on price, choice and convenience, on the back of a solid loyalty system in Prime and its FBA strategy. Higher spending on its platform along with focus on building video content, primarily for Prime subscribers, are key catalysts.
Prime, which has more than 100 million paid subscribers, 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.
Amazon’s strong delivery arm has been its strength and is providing stiff competition to brick-and-mortar giants like Walmart. In February, the company started offering two-hour delivery from Whole Foods stores to Prime members in four cities — Austin, Dallas, Cincinnati and Virginia Beach. Los Angeles is the latest addition to the list.
Amazon also offers 5% cash back benefit to Prime members who use Amazon Prime Rewards Visa card while shopping at any Whole Foods store. Further, Prime members in the United States have started receiving unlimited free two-day shipping on over 100 million different items.
Additionally, the company is transforming its Prime Pantry to a subscription-based model that will boost the Prime Pantry subscriber base.
The e-commerce giant’s international push is also commendable. Last year, Prime was launched in the Netherlands and Luxembourg. Further, the company enabled the customers in Belgium to join Prime and shop in the Netherlands. The company also introduced Prime in Singapore.
During the quarter, Amazon launched Prime Music service in India by partnering with eight national and over 300 regional record labels. Per Reuters, India is the fastest growing market for Amazon Prime Video Service driven by popularity of its original content offerings in Hindi and five local languages.
Recently, Amazon partnered with a French retailer, Monoprix, which will aid the company in strengthening its footprint in European grocery market, especially in France. Its growing interest in the area was apparent from its launch of Amazon Fresh and the acquisition of Whole Foods for $13.7 billion. Moreover, the company’s interest in France was obvious from the recent settlement with French tax authorities and its promise to create 2K jobs in the country.
We believe Amazon’s continuous efforts in making Prime more customer friendly will continue to drive subscription base of the service, which will improve the top line further.
The Zacks Consensus Estimate for Retail Subscription Services currently stands at $2.85 billion.
Amazon Web Services (AWS) to Drive Profits
AWS is still the cash cow for Amazon. This business generates much higher margins compared with the traditional retail business, which is positive for the company’s profits as it continues to grow in the mix. Moreover, expanding customer base is likely to drive the top line.
Amazon’s persistent efforts to open more data centers globally and lower prices lend it a competitive edge against the likes of Microsoft. Notably, AWS held 62% of market share last quarter.
AWS’ customer base continues to expand with GoDaddy being its latest client. During the quarter, Amdocs (DOX - Free Report) formed a strategic collaboration with AWS, which will enable the former to develop solutions that would help the service providers to adapt better to the digital world in a cost-effective way.
AWS launched a new region in France and a second AWS Region in China during the quarter. Amazon also launched GameOn, a new competitive video gaming service built on AWS, allowing developers and gamers to integrate and create competitions natively across mobile devices, PCs, and gaming consoles.
The Zacks Consensus Estimate for Retail Subscription Services currently stands at $5.24 billion.
Growing Footprint in Home Automation
Alexa powered Echo devices are going great guns and help the company sell more products and services. Alexa has already been integrated into a host of everyday devices for the digital home with agreements for more. Per Cowen & Co. consumer tracking survey, 84% of the Echo users in the United States use it for listening to music.
The IoT focus has helped Amazon maintain supremacy in the home automation market. The company has expanded connected home lineup with Cloud Cam, a security camera that allows Amazon’s delivery workers enter homes to drop off packages when homeowners are away.
During the quarter, Amazon acquired Ring, a well-known developer of internet connected video doorbell and camera devices. The deal helps Amazon expand in the home security market and improvise its in-house delivery services.
What Our Model Says
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. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
Amazon has a Zacks Rank #1 and an Earnings ESP of +12.08%, which indicates a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks to Consider
Here are few stocks you may consider as our proven model shows that these too have the right combination of elements to post an earnings beat this quarter.
Paycom Software (PAYC - Free Report) has an Earnings ESP of +0.33% and a Zacks Rank #1.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Amazon (AMZN) Q1 Earnings to Benefit from Robust Prime & AWS
Amazon (AMZN - Free Report) is slated to report first-quarter 2018 earnings on Apr 26.
The company delivered a massive beat in fourth-quarter 2017. Adjusted earnings of $2.16 per share outpaced the Zacks Consensus Estimate by 31 cents.
Net sales of $60.45 billion comfortably surpassed the Zacks Consensus Estimate of $59.98 billion. The figure surged 38.2% year over year and was toward the high end of management’s guided range of $56.0-$60.5 billion.
The Zacks Consensus Estimate for first-quarter 2018 earnings and revenues are currently pegged at $1.22 and $50.16 billion, respectively.
Amazon.com, Inc. Price and EPS Surprise
Amazon.com, Inc. Price and EPS Surprise | Amazon.com, Inc. Quote
Prime: Key Catalyst
Amazon keeps its retail business very hard to beat on price, choice and convenience, on the back of a solid loyalty system in Prime and its FBA strategy. Higher spending on its platform along with focus on building video content, primarily for Prime subscribers, are key catalysts.
Prime, which has more than 100 million paid subscribers, 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.
Amazon’s strong delivery arm has been its strength and is providing stiff competition to brick-and-mortar giants like Walmart. In February, the company started offering two-hour delivery from Whole Foods stores to Prime members in four cities — Austin, Dallas, Cincinnati and Virginia Beach. Los Angeles is the latest addition to the list.
Amazon also offers 5% cash back benefit to Prime members who use Amazon Prime Rewards Visa card while shopping at any Whole Foods store. Further, Prime members in the United States have started receiving unlimited free two-day shipping on over 100 million different items.
Additionally, the company is transforming its Prime Pantry to a subscription-based model that will boost the Prime Pantry subscriber base.
The e-commerce giant’s international push is also commendable. Last year, Prime was launched in the Netherlands and Luxembourg. Further, the company enabled the customers in Belgium to join Prime and shop in the Netherlands. The company also introduced Prime in Singapore.
During the quarter, Amazon launched Prime Music service in India by partnering with eight national and over 300 regional record labels. Per Reuters, India is the fastest growing market for Amazon Prime Video Service driven by popularity of its original content offerings in Hindi and five local languages.
Recently, Amazon partnered with a French retailer, Monoprix, which will aid the company in strengthening its footprint in European grocery market, especially in France. Its growing interest in the area was apparent from its launch of Amazon Fresh and the acquisition of Whole Foods for $13.7 billion. Moreover, the company’s interest in France was obvious from the recent settlement with French tax authorities and its promise to create 2K jobs in the country.
We believe Amazon’s continuous efforts in making Prime more customer friendly will continue to drive subscription base of the service, which will improve the top line further.
The Zacks Consensus Estimate for Retail Subscription Services currently stands at $2.85 billion.
Amazon Web Services (AWS) to Drive Profits
AWS is still the cash cow for Amazon. This business generates much higher margins compared with the traditional retail business, which is positive for the company’s profits as it continues to grow in the mix. Moreover, expanding customer base is likely to drive the top line.
Amazon’s persistent efforts to open more data centers globally and lower prices lend it a competitive edge against the likes of Microsoft. Notably, AWS held 62% of market share last quarter.
AWS’ customer base continues to expand with GoDaddy being its latest client. During the quarter, Amdocs (DOX - Free Report) formed a strategic collaboration with AWS, which will enable the former to develop solutions that would help the service providers to adapt better to the digital world in a cost-effective way.
AWS launched a new region in France and a second AWS Region in China during the quarter. Amazon also launched GameOn, a new competitive video gaming service built on AWS, allowing developers and gamers to integrate and create competitions natively across mobile devices, PCs, and gaming consoles.
The Zacks Consensus Estimate for Retail Subscription Services currently stands at $5.24 billion.
Growing Footprint in Home Automation
Alexa powered Echo devices are going great guns and help the company sell more products and services. Alexa has already been integrated into a host of everyday devices for the digital home with agreements for more. Per Cowen & Co. consumer tracking survey, 84% of the Echo users in the United States use it for listening to music.
The IoT focus has helped Amazon maintain supremacy in the home automation market. The company has expanded connected home lineup with Cloud Cam, a security camera that allows Amazon’s delivery workers enter homes to drop off packages when homeowners are away.
During the quarter, Amazon acquired Ring, a well-known developer of internet connected video doorbell and camera devices. The deal helps Amazon expand in the home security market and improvise its in-house delivery services.
What Our Model Says
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. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
Amazon has a Zacks Rank #1 and an Earnings ESP of +12.08%, which indicates a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks to Consider
Here are few stocks you may consider as our proven model shows that these too have the right combination of elements to post an earnings beat this quarter.
Western Digital (WDC - Free Report) has an Earnings ESP of +2.30% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Paycom Software (PAYC - Free Report) has an Earnings ESP of +0.33% and a Zacks Rank #1.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>