Investors are staying bullish ahead of Amazon’s quarterly report Thursday as the company’s cloud and consumer-focused businesses show signs of strength. The company’s recent ” Prime Big Deal Days ,” a fall follow-up to its main Prime Day held in July, outpaced last year’s event, according to Worldwide Amazon Stores CEO Doug Harrington. The company has also invested heavily in AI to become one of the leaders in the artificial intelligence race. In September, Amazon announced it would invest up to $4 billion in AI firm Anthropic to rival ChatGPT developer OpenAI. Shares have surged 44.5% year to date, but have pulled back approximately 17.6% from their 2023 highs in September. The stock remains flat on a 12-month basis. Amazon is scheduled to release its third-quarter results Thursday after the bell. Analysts are forecasting earnings of 58 cents a share on revenue of $141.41 billion, according to LSEG, formerly known as Refinitiv. The company has managed to beat earnings consensus in 13 of the past 20 quarters, according to StreetAccount. Meanwhile, revenue has topped estimates in 14 of the past 20 quarters, in addition to coming in-line once. However, revenue guidance for the forward quarter has only topped consensus eight of the last 20 quarters, and matched expectations once. Wall Street will be looking at both the company’s retail margins as well as the state of its cloud services division Amazon Web Services. Heading into Amazon’s earnings announcement, some of the biggest firms were optimistic on the company’s growth potential. JPMorgan keeps top pick designation JPMorgan’s Doug Anmuth expects “modest acceleration” and continued e-commerce share gains from Amazon in the second half of the year. Anmuth has an overweight rating and price target of $180 on shares, suggesting the stock could jump more than 48%. “AMZN remains our Best Idea & we continue to expect AWS acceleration in 2H23, Retail growth uptick, healthy NA margin expansion, & Y/Y decline in total capex, all of which should drive significant FCF inflection this year.” Citi maintains buy rating Citi expects the company’s operating income and revenue to come at least in-line with consensus estimates, if not better than expected. The firm kept its buy rating and $167 price target on shares, which implies 37.5% upside potential from Wednesday’s close. Analyst Ronald Josey said the company remains one of its top picks in the internet sector. “While the focus clearly remains on AWS growth in 3Q—we believe expectations are for +11 – 12% Y/Y ex-FX growth—we’ll be primarily focused on progress with AWS’ GenAI offerings now that Bedrock is GA and following AMZN’s $4B investment in Anthropic and insights into 2024.” Evercore cites attractive risk-reward picture Evercore has an outperform rating and $190 price target, suggesting shares could rally 56.5% from where they closed on Wednesday. Analyst Mark Mahaney said the Street’s total revenue and operating income growth estimates are reasonable given recent “positive channel checks.” “Overall, we see an attractive risk-reward set-up for Amazon heading into the Q3 print, given very reasonable Street estimates for topline growth and N.A. Retail Op margin assumptions (3% margin for Q3), relatively conservative buyside expectations for AWS growth, and our checks that suggest a recovering/accelerating Cloud spending environment that should persist into ’24 (which we believe the market is not giving AMZN full credit for), and improving fulfillment capacity utilization (i.e. Retail Op Margin expansion).” Morgan Stanley is bullish on Amazon Morgan Stanley also has Amazon as one of its top picks. The bank has an overweight rating and price target of $175. “Amazon’s high-margin businesses continue to allow Amazon to drive greater profitability while still continuing to invest (last mile delivery, fulfillment, Prime Now, Fresh, Prime digital content, Alexa/Echo, India, AWS, etc). … Advertising serves as a key area for both further growth potential and profitability flow-through.” Bank of America says more room for growth ahead Bank of America analyst Justin Post reiterated his buy rating while raising his price target to $154. The analyst believes Amazon is well-positioned to benefit from various secular trends, including cloud computing, online advertising and connected devices. “We were encouraged by CEO commentary that retail margins could improve beyond pre-pandemic levels (4-5% in US). … Since the February bottom, 2024E Op Income is up just 3%, and while expectations have moved higher (stock +47% YTD), we think margin upside can still drive outperformance.” —CNBC’s Michael Bloom contributed to this report.
