Amazon AMZN is scheduled to report its second quarter financial results on Thursday, July 30. The question is can the e-commerce and cloud computing firm live up to the expectations, with AMZN stock up roughly 60% since the market’s March lows.
Made for This…
The Seattle powerhouse is all but tailor-made to outperform during the coronavirus and the broader social distancing and stay-at-home push that could last some time. Back in March, Amazon announced plans to hire an additional 100,000 employees in the U.S. to deal with increased demand. This highlights its ability to expand and shine as businesses around the U.S. and the world were forced to close.
Amazon’s ability to meet demand amid the pandemic could be key, as its traditional rivals in retail such as Walmart (NYSE:WMT) WMT and Target TGT showcase their e-commerce and delivery offerings.
Outside of retail, which also includes its Amazon’s Prime-heavy subscription revenue, the company's AWS cloud computing division should be able to shine as businesses and consumers adapt to a new environment.
Of course, AMZN’s cloud business was already booming before Covid-19 and it remains a giant within the growth industry alongside Microsoft MSFT. Plus, Amazon’s fastest-growing segment has been its digital ad-heavy “Other” unit that has helped it become the third-largest player behind only Google GOOGL and Facebook (NASDAQ:FB) FB.
Amazon Prime video could also benefit because movie theaters are likely one of the last things that will come back. And more exposure might help the millions of Prime users who favor other services such as Netflix (NASDAQ:NFLX) NFLX and Disney+ DIS appreciate Amazon’s streaming offering.
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Outlook
Amazon stock has been lumped in with the stay-at-home stars such as Zoom ZM. And AMZN is up over 60% in 2020, against the S&P 500’s roughly sideways movement. But Amazon is obliviously much more than a coronavirus star. It’s a stock that has topped all of its FAANG peers over the last three years, as part of its massive decade-plus run.
AMZN has cooled off recently, roughly matching the S&P 500’s 4% climb in July. And it hovered about 6% below its 52-week highs on Friday.
Looking forward, our Zacks estimates call for Amazon’s second quarter revenue to jump 28%. This would beat Q1’s 26% top-line expansion and mark its strongest period since Q3 of 2018.
Despite the projected revenue growth, increased costs are expected to eat into Amazon’s earnings. The company’s adjusted Q2 EPS figure is projected to fall 66% to $1.75 per share. Yet, its third quarter EPS is still expected to climb 20%.
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Bottom Line
The projected near-term bottom-line setback shouldn’t be too hard for Wall Street to swallow as it spends to deal with insane demand and more. Plus, Amazon’s fiscal 2020 sales are projected to jump 25% to $351.48 billion, with FY21 expected to come in another 18% or $63 billion higher. And its adjusted FY21 earnings are projected to skyrocket 90% above this year’s figure that’s expected to dip just 12%.
Amazon is a Zacks Rank #3 (Hold) right now and we can see how much its earnings outlook has fallen. On top of that, it might be hard to impress Wall Street in the near-term and the next few weeks could be used as a chance for many to take home profits.
Therefore, investors might want to wait for a bit of a pullback in Amazon before diving in. But those with a long-term horizon should likely think about scooping up AMZN because it operates a business built for the future, which has become crystal clear during the pandemic.
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With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
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