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Amazon (AMZN) Stock Looks Like a Buy Heading into Q1 2019 Earnings

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Shares of Amazon (AMZN - Free Report) have outpaced the market in 2019, up 21% against the S&P’s 15% jump. Despite the strong start, Amazon stock rests over 11% below its 52-week high. This gives AMZN some room to run heading into the company’s first quarter 2019 earnings release that is due out near the end of the month. So, let’s take a look at why Amazon appears to be a buy right now.

Company Overview

Amazon is poised to remain a powerhouse company and perhaps stock for years to come based on its two core businesses alone. Jeff Bezos’ firm is projected to see its share of the total U.S. e-commerce market reach 52.4% in 2019, up from 48% last year, according to eMarketer. At the same time, Amazon remains the undisputed cloud computing champion. Amazon Web Services, better known as AWS, captured roughly 32% market share last year to blow away second place Microsoft’s (MSFT - Free Report) 14%, as well as third place IBM (IBM - Free Report) , and Google (GOOGL - Free Report) .

Based on current trends, the e-commerce market is set to expand as more businesses roll out robust digital offerings and delivery options. Meanwhile, cloud computing is hardly trendy and is now vital to nearly every industry, from healthcare to retail. On top of its core units, Amazon is reportedly set to expand its brick-and-mortar business beyond Whole Foods, bookstores, and its cashierless Amazon Go stores, with a significant grocery push.

Beyond trying to up the pressure on Walmart (WMT - Free Report) , Target (TGT - Free Report) , and Kroger KR, the company’s growing pharmaceutical business has worried the likes of CVS (CVS - Free Report) and Walgreens WBA. Plus, AMZN’s digital advertising business is now the third-largest in the U.S. behind only Google and Facebook. And Amazon Prime Video is a major player in the streaming TV market and is ready to compete alongside Netflix (NFLX - Free Report) , Hulu, and soon enough Disney (DIS - Free Report) , AT&T (T - Free Report) , and Apple (AAPL - Free Report) .




Even though Amazon is ready to expand, its days of massive top-line growth appear to be over for now, especially in the near-term. Our current Zacks Consensus Estimate calls for Amazon’s first-quarter revenue to pop 16.8% to reach $59.65 billion. This would mark a slowdown from Q4’s roughly 20% top-line expansion, which itself was down huge compared to Q3 2018’s 29% climb, Q2’s 39% surge, and Q1’s 43% jump. In fact, last quarter was Amazon’s smallest top-line expansion since 2015.

With that in mind, Amazon’s full-year 2019 revenue is projected to jump 18.3% to touch $275.59 billion. This might not seem like much, but it would mean Amazon pulls in approximately $43 billion more than it did last year, or more than double Netflix’s total projected 2019 sales. Put simply, when you reach Amazon’s heights, big year over year percentage gains are far harder to achieve.



Earnings Trends

Moving on, AMZN’s adjusted Q1 earnings are expected to soar 41% to reach $4.61 per share. Amazon’s full-year EPS figure is projected to climb nearly 33%. Peeking even further ahead, Amazon’s adjusted fiscal 2020 earnings are projected to skyrocket nearly 50% above our current-year estimate. This projected bottom-line growth will likely please Wall Street and help offset its slowing revenue growth.

Furthermore, investors will see that the company’s longer-term earnings estimate revision activity has trended in the right direction recently. AMZN also boasts an impressive streak of quarterly earnings beats, with an 88% average surprise over the trailing four periods.



Bottom Line

Amazon is currently a Zacks Rank #2 (Buy) based largely on its earnings estimate revision activity and sports an “A” grade for Growth and a “B” for Momentum in our Style Scores system. Amazon is also trading at a more reasonable forward earnings multiple and its 3.84 P/S ratio sits well below its Chinese counterpart Alibaba’s (BABA - Free Report) 8.86.

Amazon stock rested at roughly $1,819 per share through mid-afternoon trading Thursday, down over 11% from its 52-week high. The company is expected to release its Q1 2019 financial results on April 25.

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