Markets

Prime & AWS Are likely to Aid Amazon's (AMZN) Q2 Earnings

AmazonAMZN is scheduled to report second-quarter 2018 earnings on Jul 26.

In the last reported quarter, the company's earnings of $3.27 per share soared a whopping 121% on a year-over-year basis. The figure also comfortably outpaced the Zacks Consensus Estimate by $2.05.

Net sales of $51.04 billion comfortably surpassed the Zacks Consensus Estimate of $50.17 billion. The figure surged almost 43% year over year and beat management's guided range of $47.75-$50.75 billion.

For the second quarter, Amazon expects net sales between $51-54 billion, reflecting a year-over-year growth rate in the range of 34-42%.

Notably, shares of Amazon have returned 55.1% on a year-to-date basis, outperforming the industry 's rally of 30%.

Prime: Key Catalyst

Amazon Prime continues to act as the key catalyst in bolstering its presence in the retail e-commerce sector. Its strong loyalty system, exciting discounts, robust delivery facilities and growing movies, audio and video content portfolio remain major positives for the company's improving subscriber base.

In the to-be-reported quarter, the company launched Prime service in Australia in sync with its plan of global expansion of Prime. Amazon has also made all the Prime benefits available at every Whole Foods Stores as well as Whole Foods Market 365 stores nationwide.

We note that the expansion of the ongoing 10% discount across additional Whole Foods store will continue to drive the subscriber base of Prime, consequently bolstering revenue generation.

Further, the company rolled out services for the delivery of natural and organic products such as fresh produce, everyday food items and quality meat and seafood, purchased at Whole Foods via Prime Now in Baltimore, Boston, Philadelphia, Richmond, Chicago, Houston, Indianapolis, Minneapolis and San Antonio.

Moreover, the company's free two-hour grocery delivery service for the Prime shoppers at Whole Foods, along with Prime Savings is now available in Atlanta, Austin, Baltimore, Boston,

Cincinnati, Dallas, Denver, Los Angeles, Philadelphia, Richmond, Sacramento, San Diego, San Francisco and Virginia Beach.

Additionally, Prime members in the United States have started receiving unlimited free two-day shipping on over 100 million different items.

Amazon has also made its Prime Wardrobe available to the customers. This move is in sync with the company's strategy to bolster presence in the retail market.

Nevertheless, the company has recently introduced new online stores for school and college essentials and luxurious items namely "Back to School" and "Off to College". In fact, Prime benefits can be availed by shopping at these stores.

Regarding the Prime Video, the company has announced the addition of a new series named The Hunt, adding to its ever expanding portfolio of original content. Further, the second season of Prime Original series, Goliath, was aired in the second quarter.

We believe Amazon's strong focus toward enhancement of customer services and shopping experience with the support of Prime will continue to help it in gaining momentum in the market.

The Zacks Consensus Estimate for Retail Subscription Services is currently pegged at $3.3 billion.

Amazon.com, Inc. Price and EPS Surprise

Amazon.com, Inc. Price and EPS Surprise | Amazon.com, Inc. Quote

Growing Adoption of AWS

With growing opportunities in cloud market, Amazon continues to witness rapid adoption of its cloud platform, AWS. This can be attributed to the expanding cloud services portfolio, increasing set up of data centers and strengthening footprint in the global cloud market.

AWS currently operates 55 availability zones across 18 geographic regions globally. Further, the company's growing focus on setting up data centers in the region of LATAM is in sync with the global expansion of AWS.

Further, AWS has teamed-up with Kaleido, a blockchain business cloud in the second quarter. With this partnership, Kaleido will be available at AWS Marketplace and can be accessed across various AWS regions from anywhere globally.

Additionally, the company made Amazon Neptune, which is a graph database service, available to the general public. Further, Amazon announced the general availability of Amazon Elastic Container Service for Kubernetes (Amazon EKS).

Further, the partnership between SAP and Amazon has enabled the enterprise customers to run their SAP workloads on AWS.

All these are supporting AWS in gaining traction. During the second quarter, the company acquired clients namely - Verizon VZ , Oath, Ryanair and Zulily.

With the improving clientele, Amazon will continue to maintain its dominance in the cloud market and its competitive edge against Microsoft's MSFT Azure and Alphabet's Google Cloud.

The Zacks Consensus Estimate for AWS is currently pegged at $5.9 billion.

Alexa: Gaining Traction

Amazon's voice assistant, Alexa is gaining traction in the market with its compatibility with numerous home automation and other devices.

In the to-be reported the quarter, the company partnered with Lennar, per which the smart homes built by the latter will be equipped with Alexa and other home automation products compatible with the same.

Further, the company unveiled Alexa for Hospitality which strives to enhance the room experience for the hotel guests. It is already available at Marriott Hotels, Westin Hotels & Resorts, St. Regis Hotels & Resorts, Aloft Hotels and Autograph Collection Hotels.

Additionally, Amazon introduced Fire TV Cube, a streaming media player which can be controlled by voice commands via Alexa.

We note that the company will continue to strengthen its footprints in the home automation market with the help of Alexa. Further, Amazon launched Alexa in France during the second quarter.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP . The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Amazon currently has a Zacks Rank #3 and an Earnings ESP of +11.65%. Our proven model indicates that the company is likely to beat estimates in this quarter.

Another Stock That Warrant a Look

Here is a stock worth considering as our model shows that this has the right combination of elements to deliver an earnings beat in the upcoming releases.

Groupon GRPN has an Earnings ESP of +59.68% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Groupon, Inc. (GRPN): Free Stock Analysis Report

Verizon Communications Inc. (VZ): Free Stock Analysis Report

Microsoft Corporation (MSFT): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

AMZN VZ MSFT GRPN

Other Topics

Earnings Stocks