Amazon (NASDAQ:AMZN) reports earnings after the bell Jan. 31, but whether they make estimates or miss almost doesn’t really matter for Amazon stock anymore.
For those scoring at home, the official estimate is for $5.65 per share of earnings on $71.6 billion of revenue. There’s a “whisper number” of $5.76 per share.
Making the revenue number would put AMZN at $231 billion in sales for the year. Making the earnings number would put Amazon at $20 per share of earnings for the year. Amazon stock started the day at about $1,700.
AMZN’s Christmas numbers have been disappointing lately, as analysts like to raise estimates through January, the shares up over 12%, double the gain in the S&P 500.
If they miss, buy. If they beat, sell.
The Inside Story
The biggest story at AMZN right now is the Bezos’ divorce. Jeff and MacKenzie Bezos had no pre-nuptial agreement, they married before the company’s founding, and Washington is a community property state.
Bezos owns “just” 16% of Amazon, meaning that unlike Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) co-founder and CEO Larry Page, he can’t just wander away and expect to maintain control. If the marital split goes down the middle, he’ll have just 8%. The bottom line is that Amazon could be “in play” whenever it falters.
It might be in Bezos’ interest, before the divorce, for Amazon stock to stay down. Give her the land and the properties, keep a bigger stake in the company, then take it up afterward. That would be easy to do.
AMZN is now on solid ground to start paying dividends. A 10-1 stock split would bring in new retail investors and, while financially silly, would get the AMZN stock price up. All the things that Tim Cook did at Apple (NASDAQ:AAPL) could be coming after the Bezos’ settlement.
So, you’re saying, buy, buy, buy?
Challenges for Amazon Stock
AMZN also faces all the challenges of maturity.
There are increasing calls to break it up, even though it remains less than half the size of Walmart (NYSE:WMT) and its infrastructure is the only way small companies can compete with that retail giant. Besides, a break-up would leave the whole world to Alibaba Group Holding (NYSE:BABA). A break-up is only happening on Amazon’s terms.
AMZN is also maxing-out its growth footprint. It is following Microsoft (NASDAQ:MSFT) into Africa and the Middle East, meaning it will have cloud centers on every continent. Its services are now in every large market where they’re allowed. It could have 10% of the U.S. retail market in two years, and that’s already priced into AMZN stock.
Amazon still has room to grow in media, in groceries and delivery, but all those gains should be marginal. It could start growing in communications, buying the fiber lines that feed its data centers or provide direct communication services through its own branded smartphones.
Amazon could still move into financial services, especially after it opens its New York office. It could move into transaction processing. It could buy up its own supply chains in food, in clothing or electronics. It still has moves to make in health care, beyond just trying to limit costs for its own 500,000 employees, through its alliance with Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) and JPMorgan Chase (NYSE:JPM).
The Bottom Line On AMZN Stock
There are a lot of moving parts to Amazon, and a lot of questions about its future.
Until it decides on a strategy for the next decade, however, Amazon stock is going nowhere fast. The analyst who said it could have 10% of all retail in two years has a price target of $1,900 per share, which is still well below its all-time high.
As AMZN prepares to drop earnings, it’s no longer a screaming buy, but it’s certainly not a stock to sell. AMZN stock is one to hold — a core holding in a balanced portfolio.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in MSFT, AAPL, BABA, JPM and AMZN.
