Q4 Preview: Will Amazon (AMZN) Investors Feel the Love(Film) This Quarter?


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Amazon.com (Nasdaq: AMZN) is trading higher ahead of the company's fourth quarter earnings report, expected out after the market closes. Shares are up3.6% today.

AMZN is expected to report EPS of $0.88 on revs of $12.98 billion. The Seattle, WA-based Internet retailer reported EPS of $0.51 on revs of $7.56 billion, beating the consensus views on the top and bottom. Looking back at Q410, we sees that Amazon produced

Shares gained 17% through the quarter, to $180.00 at the end of December. Shares are down 1.8% since then, and finished 2010 about 35% better.

A simple valuation puts Amazon at a forward P/E of 51x FY11 EPS expectations, compared to 15.1x at eBay (Nasdaq: EBAY) and 54x for Netflix (Nasdaq: NFLX).

Data from Bloomberg has 25 analysts with a Buy on AMZN, 13 with a hold, and one suggesting to Sell. The analyst price target average is $193, with a high of $225 and low of $163. Shares have traded in a range of $191.60 - $105.8 over the last 52-weeks.

Amazon guided for Q410 sales of $12 - $13.3 billion and operating income of $360 - $560 million.

  • Goldman Sachs has a buy rating on the shares with a price target of $200. They're looking for revs of $13.201 billion and EPS of $1.10. They expect AMZN to report above their guidance, given robust e-Commerce demand for the industry in general and for Amazon, as their peak holiday 2010 order volume of 13.7 million grew 40% from Q409. Goldman thinks that they $654 million operating income is achievable through the combination of "high margin ebooks, Amazon Web Services, and third-party sales."

  • Kaufman Bros. is looking for Amazon to beat revenue guidance, but report a relatively in-line EPS. Revs will be driven by strong e-Commerce and Kindle sales. EPS will come in-line on higher fulfillment and marketing expenses. Therefore, they are lookinng for revs of $13.4 billion and pro forma EPS of $1.17.

    Kaufman is looking for North America sales to increase 53% in Q4, a 700 basis point sequential gain. Support for the outlook includes: 1) U.S. holiday eCommerce sales (Nov.-Dec.) accelerating to 12% Y/Y, vs. 9% in the Jan.-Oct. period, per comScore; 2) Amazon was the eCommerce leader with approximately 50% of online shoppers purchasing an item from Amazon, per Compete (next two being eBay and Walmart.com at approximately 20% each); and 3) 58% Y/Y growth in Amazon 4Q same-store sales, based on ChannelAdvisor data." Conversely, International sales are expected to increase 28%.

    Kaufman has a Hold on the shares, with a price target of $163.

  • Deutsche Bank has a Buy rating on the shares, with a price target of $186. Growth will stem from Prime in international markets, "and initiatives such as Kindle, Web Services and Payments growing in importance." Unit sales should be strong, offsetting tougher comps for the company.

  • Janney is looking for revs of $13.2 billion and EPS of $1.13. They see no sign of slowdown heading into FY11 "as Amazon is poised to tackle the large CPG opportunity while 3P expansion continues driven by FBA/Prime." They note that several third-party sources have said that Amazon Marketplace has shown growth in the 60% - 70% range though the holiday 2010 season.

    Going forward, Janney is keeping an eye on: "1) IPTV efforts/cost; 2) expect higher cash taxes in FY11 due to NOL burn off; and 3) expect a slight impact as Target moves away from AMZN services." They have a Buy on the shares, with a fair value estimate of $219.

  • Benchmark is also looking for a compression in margins stemming from increased promotional spending, price competition, and increased internal investment. They are looking for EPS of $1.01 on revs of $13.5 billion. They note that, with Kindle selling 8 million units in 2010, the device amounts to roughly 5% of total Amazon.com sales.

    Benchmark points out that eBay Gross Merchandise Volume (GMV) increased 4% from Q409. U.S. GMV, excluding autos, increased 5%, and International grew 6%.

    The firm has a Buy rating and $210 price target on the shares.
Investors will be paying attention to numbers for Amazon's electronics and general merchandise businesses. Kindle numbers will still be important, as Benchmark noted that they amount for about 5% of total sales for Amazon.

Updates for Diapers.com owner Quidsi acquisitions, as well as guidance for the LoveFilm acquisition, will also be on investors minds. No color was provided on the LoveFilm acquisition when news started spreading last week.

Amazon.com is expected to release their Q111 earnings on Thursday, January 27, 2011, at approximately 4:00pm EST. Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results withi0 n seconds of their release.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: AMZN , EBAY , NFLX

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