Amazon (AMZN) is scheduled to report results of its fourth fiscal quarter after the market close on Thursday, February 3, with a conference call scheduled for 5:30 pm ET. What to watch for:
1. HOLIDAY SALES: For the fourth quarter, Amazon has said net sales are expected to be between $130B and $140B, or to grow between 4% and 12% compared with the same quarter of last year. The company expects to see anywhere from no operating income to $3B in Q4, compared with $6.9B in the same quarter of last year.
Current consensus EPS and revenue forecasts for Amazon's December quarter stand at $3.58 and $137.56B, respectively, according to data provided by Refinitiv.
In a note sent near the start of this year, JPMorgan analyst Doug Anmuth said he had surveyed investors on their expectations for the year ahead and revealed that those he polled expect the U.S. internet sector to outperform the S&P 500, with 60% of respondents expecting market-cap-weighted internet stocks to be up more than 5%, including 41% expecting 5%-15% gains. Amazon is the "strong favorite as best performing FANG" for nearly 70% of respondents in 2022, with Meta (FB) a distant number two, Anmuth said at that time. Investors expect Alphabet (GOOG, GOOGL) to be the worst-performing FANG stock, he added.
More recently, on January 18, JPMorgan's Anmuth trimmed his Q1 and 2022 estimates for Amazon to reflect slower consumer spending levels against the backdrop of tough comps through most of the first half of 2022. While the Q4 holiday season "has generated mixed reviews," Amazon.com executed well in a challenging operating environment, Anmuth said in his research note. Though his estimates came down, the analyst believes lower expectations should help "de-risk shares." He added that Amazon "will become a cleaner story to own through 2022" and kept an Overweight rating on the name with a $4,350 price target.
Also in January, Morgan Stanley analyst Brian Nowak raised the firm's price target on Amazon to $4,200 from $4,000, driven by rolling forward his valuation to 2022, and kept an Overweight rating on the shares. Improved disclosure within tech has lead to multiple expansion over the past five-plus years and Amazon has been a player in disclosure in the past, such as with its AWS disclosure in 2015. However, with the stock having lagged Alphabet, Meta, Microsoft (MSFT), and Apple (AAPL) by anywhere from 27% to 77% over the past 18 months to the date of his note, Nowak said he thought improved disclosure could be a "positive (and needed) catalyst." He thinks better visibility into Amazon's estimated $19B spent on engineers per year excluding AWS and emerging "other bets" projects could help investors better understand the health of its core retail business and the "still-strong underlying unit economics" in retail, Nowak noted.
More recently, Nowak raised the firm's price target on Alphabet shares to $3,450 from $3,430 and kept an Overweight rating on that stock as he called out four bullish signs from the company's report earlier this week, including capital returns continuing along with the company's announcement of a 20-for-one stock split. He sees the split news adding extra pressure on Amazon to follow suit, Nowak noted.
2. CLOUD: Last quarter, Amazon reported Amazon Web Services net sales of $16.11B, which was up from $11.6B in the same quarter of the prior year. AWS operating income grew to $4.88B from $3.53B in the prior year period. Earlier this week, Alphabet reported Q4 Google Cloud revenue of $5.54B, versus $3.83B a year ago.
In a note published on January 13, Wedbush analyst Daniel Ives said his December quarter checks for Microsoft had shown incremental strength again "as the Azure cloud growth story is hitting its next gear of growth." The analyst believed large transformational cloud deals at Microsoft were up north of 50% with clear momentum heading into 2022 and also said some incremental share gains from AWS could be in the cards. The analyst also thinks the Street's view of moderating cloud growth on the other side of this work from home cycle is contrary to the deal activity Microsoft is seeing in the field. While he has seen the momentum of this backdrop in the last few years, Ives believes deal flow looks incrementally strong heading into 2022 and estimates that Microsoft is still only about 35% through penetrating its "unparalleled installed base" on the cloud transition, he added.
3. PRIME PRICE HIKE?: In a preview published by Reuters on February 1, the news service questioned if the retailer will "finally raise the price of Prime, its fast-delivery and media subscription," adding that analysts say the company "has every reason to do so."
Amazon declined to comment on Prime’s pricing, but in October CFO Brian Olsavsky said the retailer had no hike to announce, but “we always look at that,” according to Reuters' report.
The report quotes Wedbush analyst Michael Pachter as having said: "It’s about time. Shipping costs have gone up, period."
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