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Amazon share price: Everything you need to know before the Q4

Despite lofty expectations, analysts remain overwhelmingly bullish on Amazon heading into its fourth quarter earnings.

When is Amazon set to report its latest results?

E-commerce giant Amazon (AMZN) is set to report its fourth quarter (Q4) earnings on Tuesday, 2 February, after the market close.

Expectations remain elevated heading into Q4

One key impact of the coronavirus pandemic has been a radical shift in consumer behaviour – especially when it comes to how people shop.

Indeed, despite taking a massive toll on economies across the globe, COVID-19 has acted as a headwind for many e-commerce companies, with the likes of Etsy and Amazon breaking a slew of records during the pandemic period.

Amazon – arguably the world’s most prominent e-commerce player – has seen this shift in consumer behaviour strongly benefit its operational performance. Looking back at its Q3 results, the company reported substantial revenue growth at a massive scale, continued to maintain its impressive cash generative abilities, while also posting strong profit growth. Some of the key numbers from Amazon’s Q3 included:

  • Net sales of $96.1 billion, up 37%
  • Operating cash flow of $55.3 billion, up 56%
  • Net income of $6.3 billion, while earnings per share (EPS) came in at $12.37 per share, on a diluted basis

Despite clocking up record growth, the Amazon share price has mostly moved sideways following the release of its Q3 – rising a little over 4% since 29 October, 2020. AMZN last traded at $3,342.88 per share – some 66% higher than it did a year ago.

While the market may appear uncertain on the stock in the short-term, sell-side analysts remain overwhelmingly optimistic on Amazon’s prospects, with AMZN attracting a Buy rating on average, according to MarketBeat.

Analysts look to have only grown more bullish on the e-commerce giant in the last month: With Stifel Nicolaus, JP Morgan, Credit Suisse, Bank of America and Morgan Stanley all raising their price targets on AMZN in January as we head towards the company’s Q4.

Despite that bullishness, investors do have to grapple with an elevated valuation, with AMZN trading on a 97x earnings multiple – making it significantly more expensive than its large-cap tech peers Facebook, Alphabet (Google) and Apple.

Can Amazon maintain its operating momentum?

Management is confident that Amazon can again post another quarter of strong top-line growth. Looking at the company’s own guidance, management said they expected Amazon’s Q4 net sales to come in at between $112.0-121.0 billion, implying a lofty growth rate of between 28-38%.

By comparison, bottom-line expectations are somewhat more reserved. Management said they expect operating income to come in at between $1.0-4.5 billion. While lofty figures, even at the top-end of that range, they would be down on the Q3.

Analysts too have tempered their expectations, with the sell-side on average expecting Amazon to report earnings per share (EPS) of $7.19 in Q4, down materially from the $12.37 reported in Q3.

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