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Can Amazon (AMZN) Beat Q2 Earnings and Revenue Estimates?

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Amazon.com, Inc. (AMZN - Free Report) is scheduled to report second-quarter 2020 earnings after market close on Jul 30. The quarter ended June was remarkable for the company, which delivered its products and services impressively during a time when most businesses struggled to hold their ground.

A slew of factors supported the company’s gigantic scale of businesses around the world in second-quarter 2020. In fact, the trend of shopping more online during the pandemic also leveled up Amazon’s game in the area of online retail a lot during the quarter.

The company’s share price performance in the quarter ended June gives a glimpse of its growth. Amazon’s shares soared 50.9% in the said quarter, easily outperforming the broader S&P 500 Index’s rise of 25.7%. Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors in Favor of the Amazon Stock in Q2

First of all, Amazon handled its retail business extremely well during the pandemic. The retail business strictly relies on hard-to-beat prices, choices and convenience that it offers its customer through its solid loyalty program in Prime and its FBA strategy. The growing number of customers that took to ordering their essential products online in the United States and abroad really boosted Amazon’s customer pool during the said months.

Amazon’s services such as drive-in-grocery delivery and cashier-less stores also boosted demand. AmazonFresh Pickup, which allows a customer to order groceries online and collect them from a store nearby and Amazon Go, its first brick-and mortar grocery store, helped in garnering a strong band of customers.

Second, the company also gained from its wide range of cloud-based infrastructure and services. The increasing customer base of Amazon Web Services is driven by not only the varied cloud services but also the industries it caters to. For example, AWS is raising its efforts to sell cloud services to the space industry through Aerospace and Satellite Solutions — its dedicated business segment.

Third, Amazon’s AI devices — to be precise the Alexa powered Echo devices — also helped the company market a wide range of smart home products and services. The rising number of Alexa compatible smart devices is gradually increasing Amazon’s reach into digital homes.

Finally, the company’s strategies to boost sales during the pandemic are also expected to support revenues. Amazon Prime’s same-day and next-day delivery of products clearly hit a sweet spot with customers. Apart from shopping, Amazon Prime allows customers to access Prime Video, which is its streaming media service, exclusive shopping deals and free access to Prime Reading’s library of more than a thousand e-books and magazines.

The pandemic boosted Amazon Prime’s operations hugely, as online orders surged. This has ultimately boosted the number of Prime memberships as well, especially during the pandemic. Taking a look at the first-quarter 2020 performance of Amazon Prime, one finds that Prime subscription revenues went up 28% in the said quarter from a year ago and subscription sales, which comprise Amazon Prime memberships, have increased to $5.6 billion.

Q2 2020 Earnings and Revenue Expectations

The Zacks Consensus Estimate for Amazon’s second-quarter2020 earnings is $1.75per share, indicating a year-over-year decline of 66.5%. However, the Zacks Rank #3 company still has an Earnings ESP [S1] of +40.45%. This is a favorable combination for predicting an earnings beat this time around.

One may note that our proprietary model predicts an earnings beat for Amazon in second-quarter 2020. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Amazon.com, Inc. Price and EPS Surprise

Amazon.com, Inc. Price and EPS Surprise

Amazon.com, Inc. price-eps-surprise | Amazon.com, Inc. Quote

The Zacks Consensus Estimate for Amazon’s Q2 revenues is $81.31 billion. The impressive figure is expected to beat the year-ago revenues by 28.2%. Given the online shopping trends and the company’s several marketing strategies to expand their customer base, one may expect Amazon to beat the estimates in the said quarter.

Finally, the Zacks Consensus Estimate for Amazon’s current-year earnings has moved 2.8% north in the past 60 days. Amazon, which belongs to the Zacks Internet - Commerce industry, has an expected earnings growth rate of 91.9% for the next year.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

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