Amazon (AMZN) 4th Quarter Earnings: What to Expect

Amazon (AMZN) will look to extend what, so far, has been a strong showing for the FAANGs this earnings season, where Facebook (FB), Apple (AAPL) and Netflix (NFLX) have already impressed the Street with strong results.

The e-commerce juggernaut, which earlier this month raised already high expectations, is set to report fourth-quarter fiscal 2018 earnings after the closing bell on Thursday. The company has boasted that the recent holiday shopping season was the strongest in the company’s history. “Tens of millions of people worldwide” signed up for its Prime service, the company stated. Additionally, more than 1 billion items ordered by Prime members were shipped for free.

Retail sales in the U.S. from Nov. 1 through Christmas Eve rose 5.1% to more than $850 billion, according to Mastercard SpendingPulse. On Thursday, investors will want to know how much of those sales did Amazon capture? In the third quarter, the company spooked investors by issuing Q4 revenue guidance in the range of $66.5 billion and $72.5 billion, well below the consensus estimate of $73.79 billion.

For the three months that ended December, the Seattle-based company is expected to earn $5.65 per share on revenue of $71.85 billion. This compares to the year-ago quarter when earnings came to $2.16 per share on revenue of $60.45 billion. For the full year, EPS is expected to rise 335% year over year to $19.86 per share, while full-year revenue of $232.37 billion would represent a 30.6% increase year over year.

In its last-reported quarter, total revenue grew 29% year over year but fell short of Street estimates. Notably, revenue in North American surged 35% year over year to $34.3 billion, while international revenue grew just 13% to $15.5 billion. Amazon Web Services (AWS) continued to show strong growth, surging not only 46% to $6.7 billion, but posted an over 30% operating margin for the first time.

While Prime continues to serve as the key catalyst in strengthening Amazon's presence in the online retail space, AWS remains the breadwinner. Wall Street expects AWS to generate fourth-quarter revenue of $7.2 billion. Assuming AWS grows in a range of 42% to 45% this quarter, that translates to total revenue around $7.3 billion, enough to surpass Street forecast — something Amazon has done the previous four quarters.

As such, its revenue performance this quarter will reveal whether concerns about “growth fatigue” is real or perceived. After reaching the $1 trillion-mark last September, Amazon saw its shares drop some 25% during the final three months of 2018. And with the stock still down some 20% from its 52-week high of $2050, I would be a buyer ahead of these results.

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

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

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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