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Can The Amazon Juggernaut Reignite Following Q3 Earnings?

Published 20/10/2017, 15:41
Updated 09/07/2023, 11:32

The first 6 months of the year went pretty much as expected for Amazon: the stock rocketing from a starting price of $758.55 to an all-time intraday high of $1082.96 on the day of its second quarter results at the end of July. However, the reaction to those Q2 figures wasn’t completely positive, and since then the stock has been stuck between $950 and $1000. Amazon.com Inc (NASDAQ:AMZN) now sits at a current trading price of $987.39.

Spreadex: Amazon Inc

Unlike its fourth quarter update in February, April’s Q1 results were very well received. Revenue beat estimates by nearly half a billion dollars, rising 22.7% year-on-year to $35.71 billion, while earnings per share absolutely smashed expectations at $1.48 against the $1.48 forecast. The company’s increasingly Amazon Web Services division also impressed, with revenue surging 43% to $3.66 billion.

As mentioned, the reaction to July’s second quarter statement was a bit more complicated. While the stock did indeed hit an all-time high the day after the evening release, by the end of the session Amazon had fallen 4.5%. That’s because though the firm substantially beat on revenue, posting a 25% increase to $38 billion, EPS was nearly a dollar lower than forecast, at 40 cents per share against the $1.42 expected and the $1.78 the previous year.

Of course between those two releases was the thing Amazon’s 2017 will likely most be remembered for – the $13.7 billion acquisition of Whole Foods. Jeff Bezos reportedly bought the supermarket chain in order to bolster the appeal of Amazon Prime – which is $99 a year in the US – to lower- and middle-income households, with the service adding Whole Foods discounts to its next-day delivery, music and video streaming offerings.

Beyond the usual focus on revenue, which is expected to jump 26% to $41.3 billion, and earnings per share, set to fall from 52 cents to just 3 cents per share year-on-year, investors will be keen to see how the Whole Foods experiment is faring. That’ll potentially be measured not only by sales, but whether there has been a notable increase in revenue generated by Prime (Amazon doesn’t release the service’s subscription numbers).

Amazon.com Inc has a consensus rating of ‘Buy’ alongside an average target price of $1119.98.

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