E-commerce and cloud computing leader Amazon (NASDAQ:AMZN) will report its first quarter financials after the market closes on Thursday, April 27. Wall Street’s consensus estimate reveals that AMZN’s top-line growth could decelerate on a quarter-over-quarter basis.
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The macro headwinds could continue to impact consumer and enterprise spending, in turn, taking a toll on its e-commerce business and cloud segment, also known as Amazon Web Services (AWS).
Analysts expect Amazon to deliver revenues of $124.56 billion in Q1, compared to $116.44 billion reported in the prior-year quarter. This indicates year-over-year growth of approximately 7%, implying a deceleration in the sales growth rate sequentially. AMZN reported a sales growth rate of 9% in Q4 of 2022.
While Amazon’s top-line growth could soften a bit, aggressive cost-cutting measures could cushion its bottom line. Analysts expect AMZN to report earnings of $0.21 per share in Q1, compared to a loss per share of $0.38 in the previous year’s quarter.
Analyst Weighs In
As macro headwinds are likely to weigh on AMZN’s Q1 financials, Jefferies analyst Brent Thill expects the company’s cost discipline could lead to margin recovery. Thill expects the internet commerce giant’s operating margin to expand to 2.4% in Q1 compared to 1.8% in Q4 of the prior year.
The analyst believes that AMZN’s sales growth rate could bottom in the first quarter and accelerate as the year progresses. However, Thill expects the company’s high-margin cloud revenues to stay under pressure in the near term.
Nonetheless, Thill finds AMZN’s valuation attractive near its current levels and has a Buy recommendation on the stock. His price target of $135 implies 32.62% upside potential.
Is Amazon a Buy, Sell, or Hold?
AMZN stock sports a Strong Buy consensus rating ahead of the Q1 print. It has received 35 Buys and one Hold. Amazon stock has gained over 22% this year. Meanwhile, analysts’ average price target of $135.50 implies a further 32.10% upside potential from current levels.
