Amazon AMZN is set to release first-quarter 2018 results on Apr 26 after market close. Being a market leader in online e-commerce, it is worth taking a look at the company's fundamentals ahead of its results.
Amazon was beaten down badly in recent months following a series of allegations from Donald Trump, made via Twitter, on its business practices. Despite the crunch, Amazon remains one of the best-performing stocks of the year and the biggest boost to the overall market, climbing nearly 25% and easily crushing the industry
's returns of 15%.
The upside is expected to continue as Amazon is poised to beat our earnings estimate as per the Zacks methodology given the positive earnings revision trend, which is generally a precursor to an earnings beat, and attractive fundamentals (read: ETFs to Turn Amazon's Pain Into Your Gain ).
Inside Our Methodology
The stock saw earnings estimate revision of three cents over the past seven days for the first quarter. Analysts raising estimates right before earnings - with the most up-to-date information possible - is a pretty good indicator of some favorable trends for AMZN. However, the Zacks Consensus Estimate represents a substantial year-over-year decline of 17.57%.
Amazon has a Zacks Rank #1 (Strong Buy) and an Earnings ESP of +7.04%, indicating high chances of beating estimates this quarter. Betting on stocks that have a combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) usually leads to profits in an investor's portfolio. Our research shows that the chance of a positive earnings surprise is as high as 70% for the stocks with this combination. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Amazon's earnings surprise history is also impressive, with a positive earnings surprise of 1,272.26% on average for the last four quarters. Additionally, the company is expected to report revenues of $50.16 billion, up 40.44% from the year-ago quarter. Further, the stock boasts a top Growth Score of A and a solid Momentum Style Score of B though a Value Score of F looks miserable.
According to the analysts polled by Zacks, Amazon has an average target price of $1682.71 with nearly 94% giving a Strong Buy or a Buy rating ahead of the company's earnings. This indicates a 15.2% upside to the current price of AMZN (read: ETFs Face-Off as Amazon Races to Surpass Microsoft ).
What to Watch?
Amazon is investing heavily in wide areas, ranging from delivery services and data centers to Whole Foods store improvements and Prime Video content production. Though the e-commerce giant is expanding in several fields, investors will keenly watch the development in the existing businesses, including core e-commerce as well as the cloud computing business Amazon Web Services that will continue to fuel growth. Notably, Amazon Prime remains a key revenue growth driver.
Notably, Amazon has more than 100 million Prime subscribers, leading many other subscription businesses, including Spotify (71 million users), Hulu (17 million) and Tinder (three million). However, HBO and Netflix have more subscribers around the world totaling 142 million and 125 million, respectively.
ETFs in Focus
Given this, ETFs having the highest allocation to this online behemoth will be in focus going into its earnings announcement. These funds are potential movers if Amazon surprises the market with an earnings beat. As a result, we have highlighted six funds that have AMZN among their top holdings with a double-digit exposure:
Consumer Discretionary Select Sector SPDR Fund XLY - The fund has gained 3.2% in the year-to-date time frame and sports a Zacks ETF Rank #1 with a Medium risk outlook. Amazon accounts for 21% share (read: ETFs to Benefit or Lose from Rising Yields ).
VanEck Vectors Retail ETF RTH - The fund has delivered returns of 1.9% so far this year and has a Zacks ETF Rank #3 (Hold) rating with a Medium risk outlook. Amazon makes up for a 19.3% chunk of the assets.
iShares U.S. Consumer Services ETF IYC - It has added 1.9% and carries a Zacks ETF Rank #3 with a Medium risk outlook. Here, AMZN takes 17.8% share.
iShares Edge MSCI Multifactor Consumer Discretionary ETF CNDF -- This fund has added 3.5% so far this year and carries a Zacks ETF Rank #2. Amazon accounts for 17.6% of the assets (see: all the Consumer Discretionary ETFs here ).
Fidelity MSCI Consumer Discretionary Index ETF FDIS - This ETF has a Zacks ETF Rank #3 with a Medium risk outlook and has gained 2% in the same time frame. Amazon has 17.3% allocation.
iShares Global Consumer Discretionary ETF RXI - This product is up 2.6%. AMZN makes up for 12.8% share in the basket.
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