When Amazon.com, Inc. (NASDAQ:AMZN) posts last quarter’s earnings after the closing bell Thursday — the same day search giant and sometimes-rival Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) reports — owners of Amazon stock are going to see a few more lines on the income statement than they’ve grown accustomed to seeing.
This time around, the AMZN earnings report will include detailed revenue totals for the company’s hosting and cloud storage division, Amazon Web Services.
Some observers have opined the decision to add this layer of detail is a sign that Amazon Web Services, or AWS, is doing quite well. A handful of these observers have even suggested the inclusion of these details could mean AMZN is ultimately aiming to spin the Amazon Web Services business off.
Whatever it means for the future, in the present, current and would-be owners of Amazon stock may want to familiarize themselves with the numbers analysts are looking for, and what’s going to impact future performance the most.
AMZN Earnings Outlook
In retrospect, knowing AMZN, one has to wonder if the weak guidance previously offered regarding Q1’s bottom line was mostly a means of setting itself up for a nice earnings beats.
As of the last look, analysts collectively expect AMZN to post a loss of 12 cents per share of Amazon stock, versus a profit of 23 cents per share in the first quarter of 2014. And it’s not as if Amazon.com is dealing with a revenue tumble. The projected top line of $22.39 billion is 13.4% stronger than sales of $19.47 billion seen in Q1 2014.
As a refresher, Amazon.com saw respectable growth in subscriptions to its “Prime” service in the fourth quarter, as well as in sales of electronics and general merchandise. Overseas sales growth, however, was lackluster in Q4.
The “other” category on the company’s income statement (where AWS revenue is tallied) was up a hefty 41% in the previous quarter, suggesting that segment of the revenue stratification is poised to impress now that it’s going to be broken out.
3 Things for Owners of Amazon Stock to Chew On
The numbers are important to be sure, but they’re not the only part of the story holders of Amazon stock need to worry about when digesting the AMZN earnings report Thursday afternoon.
There are three other items investors may want to keep in mind:
- Drones: Though the initiative seemingly died months ago when the FAA balked at the idea of hundreds of unmanned package-delivering drones zipping about our skies, since then the federal agency has given the company permission to test the idea … under some very strict guidelines. It’s still years away from becoming a reality (if it ever does), but the sheer development of the technology is good publicity.
- Digital content: For a while, Amazon did reasonably well with digital content just by following the path blazed by Netflix, Inc. (NASDAQ:NFLX), content to remain in the runner-up position while most would-be competitors were gunning for bigger Netflix. With Apple Inc. (NASDAQ:AAPL) starting to step on more of Amazon.com’s toes, though — not to mention Google Play — in the shadow of the Fire phone’s flop and just a so-so response to Fire TV, Amazon might want to not just regroup its digital content effort. It might want to completely rethink it.
- (More) reckless spending: Kudos to Jeff Bezos and the company’s leadership for being willing to try new things in an effort to widen its net and grow total revenue. It’s a strategy that’s worked too, more or less. That open-mindedness, however, may be to the point where it’s distracting to AMZN’s management, and worse, distracting to customers. Think about it. One-hour deliveries, groceries, drones, home services, “dash” order buttons, retail stores, on-demand television, a Kickstarter-like service, X-Ray and more — all open doors to new revenue opportunities. None of them are put into place for free, though, and the combination of them all is not only burning cash, but starting to leave some consumers wondering exactly what Amazon.com is supposed to be.
Bottom Line for AMZN
While the Amazon earnings news as well as the media coverage of it — before and after — is always entertaining and prods plenty of speculation, when all is said and done it’s unlikely we’ll see any hints of major changes in the cards for the behemoth of an e-commerce company.
AMZN still is scraping by on paper-thin profits, growing largely because it’s willing to sacrifice nearly all of its margins to fend off competition from any and all directions.
Of course, as long as Amazon stock remains a compelling growth story, the lack of margins are of no concern.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.