Will Amazon.com, Inc. (AMZN) Stock Take a Quick Earnings Dive?
Amazon.com, Inc. (ticker: AMZN) will enter this week's second-quarter earnings report with more recent headlines than the Jeff Bezos-owned Washington Post.
The online retailer has generated a steady stream of news over the past few months, mostly by entering new markets -- and then drinking in the weeping and gnashing of teeth of its newly named competitors.
That has helped propel AMZN stock back over the $1,000 mark, continuing a brisk year-to-date run of 37 percent.
[See: The 25 Best Blue-Chip Stocks to Buy for 2017.]
How busy has Amazon been? Consider Amazon's accomplishments over the last few months:
-- Announced the $13.7 billion buyout of organic grocer Whole Foods Market (WFM), sending grocery retailers and big-box stores into a frenzy.
-- Enjoyed a record Prime Day in which it also boasted the most popular product sold: the Echo Dot smart speaker.
-- Applied for a trademark for a meal-kit delivery service, effectively killing any excitement over the recent initial public offering of Blue Apron Holdings (APRN).
-- Created a "hire a realtor" placeholder website that has tech experts speculating it will take on Zillow Group (Z), Redfin and other online real estate marketplaces.
-- Scared investors away from Home Depot (HD) and Best Buy Co. (BBY) by allowing Sears Holdings Corp. (SHLD) to sell its Kenmore-branded appliances on the site.
However, while all of those headlines have helped give AMZN stock a lift, none of them will be the story when Amazon reports its second-quarter results Thursday after the bell. Here's what you should watch for, and a glance at other important earnings this week.
The headline numbers. Amazon's revenues are expected to continue ballooning, with Wall Street analysts estimating 22.3 percent top-line growth (right on par with full-year forecasts) to $37.2 billion. Earnings are expected to decline by 20.2 percent, but the company still will be plenty profitable, at $1.42 per share.
In fact, Amazon -- once criticized for its inability to turn a consistent profit -- has reported positive earnings each quarter since the second quarter of 2015. That's one quarter after AMZN started breaking out its cloud service's numbers separately, and when rampant growth in the high-margin division put Amazon's bottom line on its shoulders.
Fast-forward two years, and AWS could be what sets Amazon back -- at least for a moment.
Why AMZN could be in short-term trouble. The king of e-commerce has recorded far more wins than losses in 2017, and appears to be setting up for years of more Street-beating gains. However, the rampant run in AMZN stock this year does leave it vulnerable to disappointment, especially if that comes from the segment that provided a jolt of excitement for nearly two years.
Deutsche Bank surprised investors last Tuesday with a surprise price-target cut to Amazon. But one concern was "near-term risk to investor sentiment around AMZN given slightly more cautious checks around cloud migration" that prompted the bank to reduce second-quarter revenue growth forecast for Amazon Web Services to below Wall Street's broader expectations.
Microsoft Corp.'s ( MSFT) fiscal fourth-quarter report let more doubt seep in.
[See: 7 Stock Turnaround Champions.]
Microsoft's Commercial Cloud business is on track to keep good on CEO Satya Nadella's 2015 promise that its run rate would hit $20 billion by the end of fiscal 2018. Thanks to the Azure platform as well as its now-subscription-based Office 365, MSFT's $18.9 billion annual run rate is roughly 57 better than it was this time last year. Azure itself grew sales 97 percent year-over-year.
Moor Insights & Strategy says Microsoft's cloud revenues could surpass Amazon Web Services in 18 to 24 months, in part thanks to the Azure Stack app, while Pacific Crest Securities thinks it could happen even sooner. KeyBanc says Microsoft's app "all but ensures" that it will eventually overtake AWS in the cloud.
While the cloud market is massive and big enough for both AMZN and MSFT, Microsoft's steep ramp implies that it may be taking some business from Amazon, and taking some new business that AWS otherwise would've enjoyed over the quarter -- potentially signaling a weaker second quarter than expected.
But if AMZN stock does swoon on AWS weakness, expect it to be temporary.
Deutsche Bank's price-target downgrade was mild, from $1,150 to $1,135, and still represented 12 percent upside. Plus, analyst Lloyd Walmsley not only remained among the 40 of 46 analysts with at least a "buy"-level rating on shares, but recommended investors "use any pullback around AWS growth rate shortfalls to add to long term positions."
More Earnings in Focus
Facebook (FB). Facebook stock has climbed 43 percent year-to-date with no major setbacks, but if there were a time for the king of social to crack, Wednesday evening's second-quarter earnings report might be it. Revenues are expected to continue their brisk pace with growth of 42.9 percent to $9.2 billion. But profit estimates of $1.12 per share (up 15.5 percent from last year) have significantly throttled back from three months ago, when Wall Street expected $1.30 in earnings. Wall Street's estimates are largely citing higher capex as Facebook expands its video content, which CFO David Wehrner telegraphed last quarter. But shares haven't baked this in, so anything but a wide second-quarter beat might weigh on FB stock.
Twitter (TWTR). Twitter has been a pleasant surprise this year, running 24 percent higher to clear the $20-per-share mark for the first time since late September/early October 2016, when (ultimately inaccurate) buyout rumors propelled a quick spike in TWTR stock. This year's run has been fueled by an upside surprise in first-quarter user growth and revenues. Despite the beat, Twitter's sales did drop for the first time, and JPMorgan's Doug Anmuth sees that continuing for second and third quarters. Wall Street agrees, with consensus estimates for an 11 percent top-line decline this quarter and a 7.9 percent decline next when TWTR reports earnings on Thursday afternoon. Adjusted earnings are expected to dip 61.5 percent to 5 cents per share.
This Week's Earnings Calendar
Monday. Alphabet ( GOOG, GOOGL), Halliburton Co. ( HAL), Hasbro ( HAS), VF Corp. ( VFC)
Tuesday. 3M Co. ( MMM), Amgen ( AMGN), AT&T ( T), Caterpillar ( CAT), Chipotle Mexican Grill ( CMG), Eli Lilly & Co. ( LLY), General Motors Co. ( GM), Kimberly-Clark Corp. ( KMB), McDonald's Corp. ( MCD), United Technologies Corp. ( UTX), United States Steel Corp. ( X)
Wednesday. Anthem ( ANTM), Barrick Gold Corp. ( ABX), Coca-Cola Co. ( KO), D.R. Horton ( DHI), Facebook, Ford Motor Co. ( F), General Dynamics Corp. ( GD), Nokia Corp. ( NOK), PayPal Holdings ( PYPL), Realty Income Corp. ( O)
[See: 7 Best Mid-Cap Stocks to Buy Now.]
Thursday. Amazon, Baidu Inc. ( BIDU), Comcast Corp. ( CMCSA), Electronic Arts ( EA), Expedia ( EXPE), First Solar ( FSLR), Intel Corp. ( INTC), MasterCard ( MA), Mattel ( MAT), Procter & Gamble Co. ( PG), Sirius XM Holdings ( SIRI), Southwest Airlines Co. ( LUV), Starbucks Corp. ( SBUX), Twitter, United Parcel Service ( UPS), Verizon Communications ( VZ)
Friday. AbbVie ( ABBV), American Airlines Group ( AAL), Chevron Corp. ( CVX), Exxon Mobil Corp. ( XOM), Merck & Co. ( MRK)
More From US News & World Report
