Amazon Earnings Preview: Can New Projects Boost AMZN Stock?

by James Brumley | January 28, 2014 8:57 am

Amazon Earnings Preview: Can New Projects Boost AMZN Stock?

If the pros are right, when Amazon (AMZN[1]) reports last quarter’s earnings after the close on Thursday, the world’s most prolific online retailer will post a profit of 66 cents per share of AMZN stock.

amazon1 Amazon Earnings Preview: Can New Projects Boost AMZN Stock?[2]Of course, Amazon stock owners should also know there’s only about a 50/50 chance of the Amazon earnings figure actually topping estimates, as the e-commerce giant has missed estimates in eight of the past fifteen quarters[3].

On the other hand, the Amazon earnings trend hasn’t been the big story for fans and followers of the company lately. What’s made AMZN stock such an adventure since 2011 is the big spending now aimed at even bigger revenue later.

At what point does all the spending start to pay off? As it turns out, the fourth quarter of last year may well be the turning point for AMZN stock, with analysts looking for the best quarterly profit since the fourth quarter of 2010. The market’s sure to be looking beyond the numbers, however.

The Amazon Earnings Outlook

With the back-story explained, investors will be looking for some specific numbers in the Amazon earnings results posted Thursday afternoon. As was noted above, per-share profits are expected to roll in at 66 cents per share of AMZN stock. That’s a far cry better than the year-ago figure of 21 cents per share. That’s an impressive improvement, though one slightly exaggerated by the fact that Amazon was still spending excessively (even by Amazon standards) in the fourth quarter of 2012.

Still, business is projected to be significantly better. Forecasters say sales should be up 22.5% in the fourth quarter, growing from $21.27 billion per year to an estimated $26.06 billion this time around.

Though a comparison of 2014′s projected earnings to 2013′s bottom line is irrelevant, the top line is currently projected to grow 22.3% this year. While Amazon is usually coy when it comes to forecasts, the market may be able read between the lines and make a judgment call on the company’s capacity to reach that revenue goal of $91.62 billion.

What AMZN Stock Owners Need to Watch

To give credit where it’s due, Amazon is always rolling out new ideas. Some of them are better than others. In fact, some of them are great ideas … but others are terrible.

The entry into the grocery business via AmazonFresh, for instance, is a great idea, while the development of flying delivery drones[4] is a spectacularly bad idea. There are three specific initiatives that AMZN stock investors — current and prospective — will want to pay extra attention to when we finally hear the Amazon earnings report from the fourth quarter.

And, although it’s only been something of a side project, something else that could become a hot button from the Amazon earnings report or in the earnings conference call is the possibility of an Amazon-branded smartphone[8]. Though the rumors that first surfaced in 2012 never led to an actual product, it’s interesting how the idea never really went away. Such a phone is still on the distant horizon, but it could be a catalytic talking point for AMZN stock.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Endnotes:
  1. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  2. [Image]: http://investorplace.com/wp-content/uploads/2011/04/amazon1.jpg
  3. missed estimates in eight of the past fifteen quarters: http://data.cnbc.com/quotes/AMZN/tab/5
  4. development of flying delivery drones: http://investorplace.com/2013/12/amazon-prime-air-amzn-stock-drones/
  5. concerted effort to really go toe-to-toe with the likes: http://investorplace.com/2014/01/amzn-stock-amazon-tv/
  6. NFLX: http://studio-5.financialcontent.com/investplace/quote?Symbol=NFLX
  7. cut its cloud pricing again: http://venturebeat.com/2014/01/21/amazon-steps-up-the-pressure-with-more-cloud-storage-price-cuts/
  8. possibility of an Amazon-branded smartphone: http://www.fool.com/investing/general/2014/01/26/amazoncom-could-dominate-the-us-smartphone-market.aspx

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