Amazon: What’s on the Menu for Q2 Earnings

‘Tis the week of the stock market giants, when the Big Tech stalwarts take center stage, and report Q2’s financials. On Thursday, all eyes will be on Amazon (AMZN).

Out of all the big hitters, Amazon was the one to back last year as a large chunk of the population turned to online shopping for the first time during the pandemic, thereby resulting in unprecedented demand for the company’s myriad services.

It has been hard for the stock to replicate 2020’s success, and Amazon has relatively underperformed when compared to most of its Big Tech peers. That said, heading into tomorrow’s print, Monness’ Brian White believes the company is well set up to benefit in a post-pandemic world.

“After experiencing surging demand during the pandemic,” the 5-star analyst said, “Amazon’s stock has been range bound over the past several months; however, we believe the company is uniquely positioned to exit this crisis as one of the biggest beneficiaries of accelerated digital transformation.”

2Q21 counted two notable events for the ecommerce giant. For one, this will be the first earnings call without Jeff Bezos at the helm. The founder and CEO officially left on July 5, since when Andy Jassy has been running the show. Secondly, in contrast to pre-pandemic times, Prime Day this year was held in June instead of July, so will affect Q2’s results.

According to media reports, this year’s Prime Day was a more modest affair, although Amazon does not divulge official sales figures around the event. In any case, White thinks the company’s 2Q21 outlook “incorporated sufficient cushion to reflect this year’s unconventional timing.”

Amazon expects second quarter sales of between $110.0 billion to $116.0 billion and operating income in the $4.5 billion to $8.0 billion range with ~$1.5 billion “in COVID-related costs.”

As for White’s forecast, the analyst expects Amazon to “slightly exceed” his Q2 revenue estimate of $115.99 billion – a 30% year-over-year increase and above the Street’s $115.11 billion estimate. White also anticipates the company to “at least” meet his EPS projection of $13.21 – Street has $12.25.

Looking ahead, White’s Q3 revenue estimate calls for an uptick of 28% YoY with sales hitting $123.00 billion vs. the consensus estimate of $118.66 billion. EPS is expected to hit $15.15, also meaningfully above the Street’s forecast of $12.96. With Prime Day already out of the way, the forecast amounts to 6% QoQ growth, which is lower than the four-year average 10% growth of prior September quarters.

“The reopening of the world represents a revenue headwind and costs related to COVID-19 remain a swing factor to profits,” the analyst wrapped up.

Overall, there’s no change to White’s rating, which stays a Buy, or price target, which remains at $4,500. The implication for investors? Upside of ~24%. (See White’s stock analysis on TipRanks)

The Street’s average price target is a touch lower, and at $4,332.90, suggests one-year gains of ~19%. Wall Street’s analyst corps are in unanimous agreement regarding Amazon’s trajectory; the stock boasts a Strong Buy consensus rating based on Buys only – 32, in total. (See Amazon stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.