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AMZN: For Amazon Stock, Sales Are King

Yet again, actual Amazon earnings won't matter when the company reports its quarterly results


Amazon (AMZN) reports earnings next Thursday, April 24. And if you’re wondering what metrics you should hone in on when the numbers are officially released after the bell, I’ll let the analysts over at Bernstein Research sum it up for you.

amazon-stock-amzn-stock“The revenue trajectory matters for the stock price in the short term and will be the main focus of investors in the next quarter or two,” according to a recent Bernstein report.

Yes, according to the experts, sales will still be king for Amazon stock next week.

The Main Driver of Amazon Stock

It’s hardly news that actual earnings aren’t usually the metric Amazon stock investors focus on — largely because AMZN hasn’t actually had any much of the time.

Besides, while Amazon earnings are expected to actually exist this time around, estimates have been sliding pretty steadily. Analysts have cut their EPS estimates for AMZN by more than half over the last three months, with the consensus dwindling from 54 cents to just 24 cents — but still good for a year-over-year improvement of 33%.

This Amazon earnings report, though, the analysts over at Bernstein expect the focus on sales to actually be a good thing. That’s because they expect revenue to come in strong, which should bode well for shares of AMZN stock.

Remember, shares of AMZN stock took a beating after the company’s last earnings report — thanks in part to a sales miss. Amazon reported revenue of $25.6 billion in its fiscal fourth quarter. And while that translated to a 20% year-over-year improvement, it didn’t quite measure up to the $26 billion analysts had slated.

Of course, actual Amazon earnings missed the mark in that last report as well. The result? The day after the numbers were released, AMZN stock slid 11% … and pretty much hasn’t stopped sliding since. And we can’t just blame that steady downward trend on broad weakness — the 22% hit Amazon stock has taken since the end of January is 10 times the damage done to the Nasdaq.

But this go-round, Bernstein expects a solid sales beat — which could get Amazon stock chugging higher again.

The cold, hard numbers? While the current consensus is for 21% sales growth to a total of $19.4 billion, Bernstein analysts expect an extra $3 billion (good for an extra percentage point) to be tacked on top.

The driver of that sales beat is a reacceleration of electronics and general merchandise sales in North America, coupled with media growth in the region — which should be enough to offset international weakness. See, North American growth slowed in the previous quarter as shoppers shifted towards slower-growth categories like electronics and toys.

But Bernstein analysts believe that’s just a seasonality trend, and that shoppers in the first quarter once again flocked towards higher-growing categories like apparel and consumables — a reality that should be good for revenue.

Of course, there is a caveat: If international sales are weaker than expected, a revenue miss could be in the cards.

But there’s still a silver lining here for Amazon stock investors. Sure, sales may miss expectations if international sales are extremely weak. But international weakness is not Amazon-specific, and segments like Prime, Kindle and Instant Video are less penetrated overseas, with more room to accelerate.

So if Amazon stock starts to sink due to overseas weakness, Bernstein says to be ready to snatch up some shares.

Of course, you don’t have to take Bernstein Research’s word for it. Just consider this: Shares of AMZN stock are currently trading for just $315 after the recent bloodbath. Meanwhile, the average consensus price target for Amazon stock is a sweet and savory $434.

That translates to 38% upside from yesterday’s close, meaning Bernstein analysts aren’t the only ones that expect some upwards movement out of Amazon stock in the near future.

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

Article printed from InvestorPlace Media,

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