By Senad Karaahmetovic
Amazon.com Inc (NASDAQ:AMZN) is due to report Q1 results on April 27 after the market close. The Street expects EPS of $0.21 on revenue of $124.55 billion.
Analysts are out with their previews of the Q1 earnings report with a key focus on the magnitude of the deceleration in AWS. Evercore ISI analysts see some downside risk to the Street’s Q1 and Q2 AWS Revenue and Operating Income estimates.
“We see the outlook for AWS growth and profitability as the key near-term issue on AMZN shares, with our extensive channel checks and modeling pointing to deteriorating and probable SD% revenue growth in Q2, along with close to 20% Operating Margins. This may well be priced in, but we believe it hard for AMZN shares to materially outperform with this near-term fundamental outlook,” the analysts said in a client note.
Still, they say Amazon remains an attractive long-term play “with revenue growth likely to accelerate for all three segments going into ’24, with Operating Margins also likely to rebound into ’24, and with FCF dynamics improving as well.”
Similarly, UBS analysts cut the price target on Amazon stock to $125 per share and remain cautious heading into the Q1 print. The analysts added that the cloud story remains “challenging near-term.”
“We remain constructive on AMZN shares over a 12-month view and think that line of sight to an eventual AWS stabilization is the focus among investors. We do not expect to get that this Q. But sentiment is so weak and we think investors expect continued weakness already. We reduce our ests and PT on AMZN based on weaker AWS,” they said in a note.
On a more positive note, Telsey analysts see Amazon continuing “to gain market share by leveraging its sticky Prime member base, small business relationships, technological edge, and retail consolidation.”
“Amazon's focus on newer business—grocery, pharmacy, fashion, home, private brands, third-party, same-day/one-day delivery, Amazon Logistics, and telehealth—should make Amazon more valuable. The strong growth and profitability of AWS, as well as its media and advertising offerings, should continue to outperform the company average and support Retail. Taken together, we maintain our Outperform rating."