Amazon Share Price: Q3 Earnings Preview

We examine Amazon's recent share price and operational performance as well as look at how sell-side analysts view the e-commerce giant.

With Amazon.com Inc (AMZN) set to announce their third quarter results this Thursday, October 29, we examine some of the key things investors should know ahead of this earnings release.

Investors remain bullish

The market has continued to lean bullishly on the tech giant over the last quarter, with the Amazon share price up 7.35% or $20.35 to last trade at $3,204 per share.

YTD Amazon is up 68%.

This strong performance should come as little surprise – after the company posted a set of record second quarter results in July. Overall, for the June quarter ending and on a YoY basis Amazon reported:

  • Net sales of $88.9bn, up 40%; against operating expenses of $83.0bn
  • Net income of $5.2bn and earnings per share (EPS) of $10.30
  • Operating cash hit $51.2bn, up 42%

Elsewhere, Amazon Web Services (AWS) – Amazon’s cloud computing arm – continued to be a key driver of profitability for the e-commerce giant, contributing $10.8bn in net sales and $3.35bn in operating income to the company’s Q2 consolidated figures.

Speaking of these results, Jeff Bezos, Amazon’s Founder and CEO said:

‘This was another highly unusual quarter, and I couldn’t be more proud of and grateful to our employees around the globe.’

Looking forward, Amazon management, in July said they expected Q3 nets sales to come in at between $87-93bn, implying a YoY growth rate of between 24-33%. On the bottom-line, the expectation is for operating income to come in at between $2.0-5.0bn in Q3 – a figure that is inclusive of approximately $2.0bn in Covid-19 related costs.

‘This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded,’ the company flagged.

Analysts remain bullish

As with the broader market, the sell-side community have remained overwhelmingly bullish on AMZN in recent times with the stock commanding a Buy rating on average, against an average price target of $3,743 per share, according to MarketWatch.

Indeed, over the last month many high profile analysts have reaffirmed their ratings or price targets:

  • Pivotal Research raised their price target from $3,925 to $4,500 and retained their Buy rating
  • Societe Generale raised their rating to Buy, and lifted their price target to $3,660
  • JP Morgan, Jefferies and Goldman all reiterated their Buy ratings on the e-commerce giant
  • Morgan Stanley actually lowered their price target, from $3,750 to $3,740

On a more granular level, Mizuho analyst James Lee reiterated his Buy rating and bumped up his price target on AMZN to $4,000 and said:

‘With conversion rates rising during the pandemic, we believe that 3Q20 is tracking ahead of consensus revenue growth of 32% YoY, or 8 points of deceleration compared to 2Q20, partially due to the rescheduling of Prime Day this year.’

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