Amazon.com Inc. is scheduled to report second-quarter earnings on Thursday after the closing bell, and analysts expect the company to get a boost across its businesses, from retail to advertising and cloud services.
“The Prime membership price increase is a solid margin tailwind,” wrote MKM Partners analyst Rob Sanderson. “Prime is thought to be at around 55 million households in the U.S., about $1 billion of incremental profit contribution (annual basis) beginning Q3.”
Amazon AMZN, +1.88% is on the road to $1 trillion in market capitalization, with popular opinion convinced that it will beat Apple Inc. AAPL, +0.94% to the mark.
Read: First to $1 trillion: Amazon or Apple? No-brainer – the people have spoken
Amazon’s 36-hour Prime Day event started off with a few glitches, but wrapped up on a high note.
“We saw some intermittent AWS Management Console issues on Monday, but they did not drive any meaningful impact on Amazon’s consumer business,” an Amazon spokesperson said in a statement sent to MarketWatch.
Amazon says it got more new Prime members on July 16 than any other day in the company’s history, and items like Fire TV devices, the Echo Show and Instant Pot cookers were big sellers. The company did not release revenue numbers for the event.
See: Thanks to Amazon Prime Day, the back-to-school shopping season is already under way
MKM’s Sanderson said Prime Day sets the stage for “solid” revenue guidance, with the event expected to add about 200 basis points to the third-quarter.
“Cyber Monday was the largest, reported to be $6.6 billion total for U.S. online sellers,” Sanderson said. “We estimate that Amazon was 47% of online commerce in the U.S. last Q4 (likely more on Cyber Monday), implying that Prime Day was well over $3 billion this year.”
An eMarketer report published July 13 forecasts that Amazon will capture 49.1% of the U.S. e-commerce market this year followed by eBay Inc. EBAY, +1.10% (6.6%), Apple (3.9%) and Walmart Inc. WMT, -0.07% (3.7%).
MKM rates Amazon shares a buy with an $1,840 price target.
Forty-eight analysts polled by FactSet have an average buy stock rating for Amazon with an average price target of $1,930.
Here’s what to expect:
Earnings: FactSet is guiding for earnings of $2.48 including Whole Foods Market, up from 40 cents per share last year.
Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, expects earnings of $2.66 per share.
Amazon has beat earnings expectations the last three quarters.
Revenue: FactSet expects revenue of $53.37 billion, up from $37.96 billion last year.
Estimize expects revenue of $54.12 billion.
Amazon has beaten revenue expectations the last five quarters.
Stock price: Amazon shares are up 22.8% for the last three months, and up 59.4% for the year to date. The S&P 500 index SPX, +0.91% is up 6.5% for 2018 so far.
Other issues:
-Stifel analysts think Amazon is well positioned in three industries: e-commerce, cloud computing and digital advertising.
“A healthy consumer spending backdrop in the U.S., which should support strong results in the retail business, and continued strength in both AWS and advertising are likely to be highlights in the quarter,” analysts led Scott Devitt said. “Growth in AWS accelerated in the most recent two quarters as clients move more workflows to the cloud and client usage continues to grow.”
Stifel is expecting cloud revenue to grow 46% year-over-year to $6 billion. Analysts expect the call to focus on Prime Day, grocery, the company’s health care strategy and investment for the remainder of the year.
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Stifel rates Amazon shares a buy with a price target of $2,020.
-“Ramping advertising spend on the platform could boost margins,” wrote Cowen analysts in a preview. Cowen estimates that Amazon’s advertising business will grow from $8.5 billion in 2018 to $36 billion in 2023.
See: Look out Facebook and Google: Amazon is becoming an advertising giant
Cowen analysts estimate second-quarter revenue for the cloud business at $5.95 billion, up 45% from last year. U.S. Prime membership is estimated at 60 million households during the second quarter.
Cowen rates Amazon shares at outperform with a $2,100 price target.
-“Given the strong cloud backdrop and our early ’18 CIO survey indicating an intent to accelerate spend, along with ongoing advertising growth, we believe AWS and ‘other’ segment revenue upside is likely,” wrote Piper Jaffray analysts led by Michael Olson. “Between these two non-retail segments (AWS & Other), we see potential for slight Q2 upside for Amazon overall revenue and operating income, despite an online retail segment revenue that is likely to be uneventful.”
Piper Jaffray rates Amazon shares at overweight with a $2,075 price target.
-AWS is still underappreciated by many investors, said Daniel Ives, head of technology research at GBH Insights, in a recent note.
“AWS still in the early innings of a massive secular opportunity,” Ives said, noting that more chief information officers at businesses are becoming more comfortable with moving their data to public or hybrid cloud environments.
Ives expects “35% of application workloads will migrate to the public and hybrid cloud by the end of 2018 and 55% by 2022 on the cloud which should be a major benefit and tailwind for AWS going forward.”
Additional reporting by Wallace Witkowski.
