Amazon Earnings: What to Watch

Analysts expect earnings per share and revenue above year-ago

Feb. 2, 2017

Amazon.com Inc. is scheduled to announce its fourth-quarter earnings after the market closes on Thursday. Here’s what you need to know:

EARNINGS FORECAST:

Analysts polled by Thomson Reuters expect Amazon to earn $1.35 per share, compared with unadjusted results of $1 per share a year ago. Full-year earnings are expected to be $4.76, compared with unadjusted earnings of $1.25 per share a year ago. The company forecast operating income of between $0 and $1.25 billion for the quarter, compared with $1.11 billion a year ago.

REVENUE FORECAST:

Quarterly revenue of $44.68 billion is forecast by the analysts, compared with $35.75 billion a year ago. Amazon said it expected sales of between $42 billion and $45.5 billion for the quarter. Full-year is expected by analysts to be $137 billion.


WHAT TO WATCH:

--HOLIDAYS: All eyes will be on Amazon’s sales over the holidays, which are expected to show solid growth. According to Slice Intelligence, which collects data from email receipts of 4.2 million shoppers, Amazon was a clear winner, commanding an estimated 38% of online sales. E-commerce also grew at a rate faster than total retail spending—about 20%. But will that growth come at a price due to promotions? If so, Moody’s analysts say that it could be a bellwether for the rest of the retail industry and signal lower margins across the board. Morgan Stanley analysts argue that even if the value of products sold on the website increased faster than profits, it’s still a core gauge of the health of the online retailer.

--COSTS: And that’s where costs come in. In the third quarter, Amazon disappointed some with what was seen as a lackluster forecast for fourth-quarter profit (starting at $0) and big warnings on continued increased spending through at least the end of the year. The company pushed its one- and two-hour Prime Now delivery service as a last-minute option for procrastinators, but the company has said speedy deliveries have caused an uptick in costs. Oppenheimer analysts say they expect the current investment cycle, focused on international expansion, logistics, content and domestic hires, to last for about another year. Analysts will be looking for any clarity on future spending levels.

--TRANSPORTATION: Also playing into increasing costs are Amazon’s transportation ambitions. Amazon this week announced it’s planning to build its first air hub, following Amazon’s recent jump into ocean freight as it begins to handle shipment of goods by ocean to its U.S. warehouses from Chinese merchants selling on its site. But, as United Parcel Service Inc. and FedEx Corp. often point out, it’s a costly, difficult and low-margin business to build. Amazon’s new air hub alone is expected to cost around $1.5 billion. The company also has been building new warehouses closer to consumers, something that helps cut back on the distance needed to ship a package—but is expensive. Transportation consultant Satish Jindel warns that as Amazon fashions itself further into a logistics company, investors may start to view it that way—something that may add pressure to margins.

--POLITICS: Likely to be asked on Thursday’s call: How is the relationship with President Donald Trump? Amazon has see-sawed with the new administration in recent weeks, first announcing it was creating 100,000 jobs over the next 18 months in what appeared to be a peace offering to the incoming president, then on Monday saying it was working with lawmakers to counter Mr. Trump’s executive order on immigration.

CEO Jeff Bezos and Mr. Trump have had one of the rockier public relationships between the president and a company leader, in part because of the CEO’s ownership of the Washington Post. Top of mind for retailers ranging from eBay Inc. to Amazon is a concern about border taxes or trade restrictions, which may disrupt or drive up costs for their businesses.

Amazon's stock could soar 40% to reach Wedbush's new Street-high target

Apr 24, 2017

Shares of Amazon.com Inc. rallied 1.2% in premarket trade Monday, after Wedbush Securities analyst Michael Pachter boosted his stock price target to $1,250, which is now the highest among the 46 analysts surveyed by FactSet, citing expectations of continued "substantial earnings growth." Pachter's new target, up from $900, is 39% above Friday's closing price of $898.53. The stock traded at $909 ahead of the open, just below the April 5 record close of $909.28.

"Amazon appears intent upon growing annual profits (with some quarterly volatility), which we expect to continue as the company invests in growth," Pachter wrote in a note to clients. "Amazon Web Services (AWS) should be the growth engine, with its gross and operating margins expanding rapidly." He said margin expansion could be tempered by spending on video content, fulfillment and international expansion.

Separately, Goldman Sachs analyst Heath Terry raised his stock price target to $1,100 from $1,000, citing expectations of revenue acceleration.

Amazon is scheduled to report first-quarter results after Thursday's closing bell. The stock has soared 20% year to date, while the S&P 500 has gained 4.9%.

Amazon surges on big earnings and sales beat

• EPS: 1.48 vs. $1.12 estimate, according to Thomson Reuters consensus
• Revenue: $35.7 billion vs. $35.3 billion estimate, according to Thomson Reuters consensus
• AWS Sales: $3.66 billion, in line with estimates, according to FactSet

Amazon reported first-quarter sales and earnings that topped analyst estimates, as the company's e-commerce and cloud-computing businesses continued to take business from rivals. The stock climbed 4.7 percent after hours.

Sales jumped 23 percent to $35.7 billion and earnings per share climbed to $1.48 from $1.07. Analysts expected sales of $35.3 billion and EPS of $1.12. The stock surged to $961.80 in extended trading after closing at a record $918.76.

Amazon Web Services is drawing more small businesses and large enterprises to its cloud platform. AWS sales increased 42 percent to $3.66 billion, even as the company slashed prices.

Unlike Amazon's retail business, AWS turns a big profit, giving CEO Jeff Bezos more of a cushion to get aggressive on pricing with things like Amazon Prime.

Amazon Inc. ( AMZN) may be preparing a deal to buy Slack Technologies in a deal that could value the messaging startup group at more than $9 billion, according to a Bloomberg report published Thursday.Slack is a platform where employees can send messages, collaborate, organize and share files, with technology that also integrates with a wide variety of business software -- such as Salesforce.com Inc and Microsoft Corp.'s MSFT Skype -- allowing employees to do all their work within Slack. An agreement is not certain and discussions may not go further, the sources told Bloomberg.

Amazon is buying Whole Foods for $13.7 billion

June 16, 2017

In a statement Friday morning, the online retailer said it would buy the high-end grocer for $42 per share, more than the $33.06 per share Whole Foods closed at on Thursday.

The deal is Amazon’s biggest deal ever, topping the $1.2 billion the company paid for online footwear retailer Zappos in 2009. In pre-market trading on Friday, Amazon shares were up slightly, rising about 0.9%. Whole Foods shares were halted for trade shortly after 9:00 a.m. ET.

Amazon CEO Jeff Bezos said, “Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy.

“Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades – they’re doing an amazing job and we want that to continue.”

John Mackey, the CEO of Whole Foods, will remain CEO of the company and its headquarters will remain in Austin, Texas. The companies expect the deal to close in the second half of this year.

Earlier this week, Mackey made headlines after calling activist hedge fund investors Jana Partners “greedy bastards” in an interview with Texas Monthly. Jana Partners earlier this year disclosed it had acquired an 8.3% stake in Whole Foods and said it would seek talks with company management.

This move comes as Amazon has made ever-larger moves into the grocery and fresh-food space, which has been a battleground for online retailers that have been trying to shakeup the grocery space for years.

Back in April, Bloomberg reported that Amazon had weighed a bid for Whole Foods in 2016, though Bloomberg reported that the company’s discussions “never turned into a concrete plan.”

Amazon to Buy Whole Foods for $13.7 Billion

Whole Foods will continue to operate stores under its brand

June 16, 2017 9:19 a.m. ET

Amazon.com Inc. said it would buy Whole Foods Market for $13.7 billion as the giant internet retailer makes a deeper push into the grocery space.

Amazon will pay $42 a share for Whole Foods, valuing the grocer at a 27% premium to its closing price Thursday. The deal is expected to close in the second half of this year.

In recent years, the once online-only bookseller that has expanded to dominate much of the retail space has made inroads into the physical retail market, including opening a small number of Amazon book stores.

In recent years, Amazon has expanded its online grocery business, AmazonFresh, after testing it in its hometown Seattle for years. While grocery accounts for a large component of consumer sales overall, online retailers have largely been unable to fully crack the code. They face hurdles like consumers wanting to pick their own produce and the need to deliver fresh and frozen food to people’s homes.

Shares of Amazon were up 0.9% in premarket trading as Whole Foods shares were temporarily halted on the news.

John Mackey will remain as chief executive of Whole Foods and the store will continue to operate under its brand and maintain its suppliers.

Whole Foods’ stock has lost nearly half of its value since peaking in 2013, as its same-store-sales have persistently fallen since September 2015.

Shares of Amazon were up 0.9% in premarket trading as Whole Foods shares were temporarily halted on the news.

Pete Najarian Sees Unusual Options Activity In Sprouts Farmers Market

June 19, 2017

On CNBC's "Fast Money Halftime Report", Pete Najarian spoke about unusually high options activity in Sprouts Farmers Market Inc.

He noticed that somebody bought 9,500 contracts of the December 25 calls for $1.50 in the first half of the trading session on Monday. To help finance the trade, the trader sold 15,000 contracts of the December 17.50 puts. Najarian explained that he or she is willing to own the stock at $17.50, if it closes below that price level at the December expiration.

Amazon strikes again: Nordstrom, JC Penney shares tank on 'Prime Wardrobe' rollout

• Amazon announced Prime Wardrobe service on Tuesday.
• Shares of JC Penney and Nordstrom declined after the announcement.

June 20, 2017

Apparel stocks dive as the Amazon juggernaut rolls on.

First, it was Amazon buying Whole Foods and threatening to disrupt the grocery business.

Never mind Whole Foods has less than 3 percent of that business, the mere fact that Amazon was involved has been enough to send grocery chains into a tailspin.

Tuesday brought Amazon Prime Wardrobe, where the online retailer tackles the biggest problems of buying clothes: 1) the time it takes to shop, 2) the hassle of finding the size that's right for you, and 3) returning stuff you don't want.

Judging by the market's reaction, it looks like the Street believes Amazon has advanced the ball considerably: Nordstrom closed down nearly 4 percent, JC Penney more than 5 percent, and Ascena Group and Chico's more than 4 percent. Even discounters like TJX and Ross Stores fell 3 percent and nearly 5 percent, respectively.

It's a simple idea: try before you buy, and only pay for what you keep. Pick out three items or more, and you get shipping for free (if you're a Prime member of course). You have seven days to try the stuff on and decide what you keep.

The real genius is the return policy: you get 10 percent off if you keep three or four items, 20 percent off if you keep five or more. The more you keep, the more you save. Dump the rest in the box and leave it at your doorstep: "You don't even need to be home when they come by to pick it up for free."

Amazon announced Wardrobe this morning with a pithy video filled with diverse, impossibly good-looking people trying on all manners of clothes, showing them off to friends and family, then dumping what they didn't want into a giant box and leaving it at their doorstep, where, presumably, UPS will magically whisk everything away.

Analyst reaction has been muted so far, but give it a day or so. Pacific Crest also noted the key was the return policy: "We think incentivizing consumers to take multiple units (similar to Walmart's Jet.com) is critical to help lower shipping/handling costs long term and drive more sustainable e-commerce business models."

In theory, this is not a retail apocalypse, since it appears Amazon will support brands that are outside Amazon's private label, including Calvin Klein, Adidas, Hugo Boss, and others. The market may be trying to make this distinction. Calvin Klein is owned by PVH; that stock is only down 0.6 percent midday.

But PVH is the exception. Every large shoemaker—which theoretically could also sell through Amazon—is down two to three percent, including Deckers, Skechers, and Steve Madden.

Amazon and Dish Network: A Match in the Making?

A tie-up with the tech company could aid Dish Network’s foray into wireless business

July 6, 2017

For years Dish Network Corp. Chief Executive Charlie Ergen has sought out deals and partnerships with just about every major telecom company, from Sprint Corp. to T-Mobile US Inc. to AT&T Inc. — so far, to no avail.

Now, the satellite-television mogul is turning his attention to the technology world and a new—and somewhat surprising—potential partner has emerged: Amazon.com Inc. CEO Jeff Bezos.

The two men have gotten to know each other better over the past year and have discussed a partnership to enter the wireless business, according to people familiar with the matter.

Among the ideas: Amazon could help finance a network Dish is building focused on the “Internet of Things” — the idea that everything from bikes to Amazon’s drones can have web connectivity everywhere. Another idea is that Amazon, as a founding partner of Dish’s new wireless network, could offer an option for Prime members to pay a little more a month for connectivity or phone plan, one of the people said.

No deal is imminent and it is unclear if the companies will move forward with a partnership. Dish has discussed versions of the “founding partner” concept with other technology firms, one of the people familiar with the matter said.

Amazon “is taking a walk vs. a run approach with Dish,” adds one person familiar with the talks. The two companies struck deals in May that allow some Dish customers to control their set-top boxes through artificial intelligence assistant Alexa on Amazon’s Echo speakers and make Dish streaming-TV apps available on Amazon Fire devices.

An all-out acquisition of Dish by Amazon is highly unlikely, the people say.

Amazon and Dish declined to comment.

The possibility of an Amazon-Dish tie-up comes amid a swirl of deal and partnership talks in the wireless industry. Cable companies, tech giants and the incumbent telecom carriers are all trying to position themselves as smartphones and the mobile web capture more of consumers’ attention, and as Washington regulators throw up new opportunities and obstacles.

Sprint Corp. was holding merger talks with T-Mobile before putting those temporarily on hold to explore a deal with Comcast Corp. and Charter Communications that could bolster those companies’ plans to offer wireless service.

Joining with Dish on a wireless network could potentially advance the online retail giant’s ambitions in a range of new businesses. It could give the company quality control over connectivity for its Amazon Dash buttons — which allow people to reorder household goods easily — and its Echo speaker powered by Alexa. And it could help improve Alexa’s technology by putting the intelligence throughout the nodes of a wireless network, said one wireless executive who has worked with Amazon and Dish, enabling Alexa to be faster and more humanlike in its responses to searches due to proximity to users’ locations.

Amazon could also offer a one-way broadcast signal for Amazon Prime video on a slice of Dish’s airwaves, ensuring shows and movies stream without hiccups everywhere, one person close to Dish’s plans said.

It also could help Amazon’s plans to operate a network of drones delivering packages to customers, wireless executives and people familiar with Amazon’s thinking said. The company could “command and control” those drones and “consider real-time changes in directions or multi-stop delivery routes through messages from the network,” wrote Citigroup analysts speculating about a Dish-and-Amazon partnership in the wake of a May report from Satellite Business News.

Dish has been seeking to enter the wireless business for several years as a way to diversify away from its shrinking core satellite TV business. Dish and its affiliated entities have spent more than $21 billion over the course of a decade to acquire airwaves nationwide, but Dish lacks a network to deploy the spectrum and has been on the hunt for a partner.

To meet a March 2020 government-mandated deadline to offer service on some of its spectrum, Dish is building a bare-bones, so-called “fifth-generation,” or 5G, network that will cost less than $1 billion.

Citi analysts said a partnership between Dish and a technology giant like Amazon or Google could take many forms. Amazon could become a “preferred customer” on a new wireless network and commit to spending a certain amount on connectivity in exchange for a below-market rate. It could also invest cash upfront in Dish’s network to help pay for the build out, in exchange for a significantly-discounted price upon the launch of the network.

In a private meeting with investors and J.P. Morgan analysts in May, Mr. Ergen indicated that he believed technology companies could be looking seriously at the wireless business, especially as the Trump administration seeks to roll back “net neutrality” rules that were meant to guard against carriers extracting tolls from content companies for better service, according to an attendee.

“They’re going to have to make sure that in a world of net neutrality…being eliminated, that they’re positioned so that they’re not in a situation where their connectivity is clogged,” Mr. Ergen said earlier in May.

Amazon Prime Hits 85 Million Members Milestone

July 7, 2017

Amazon.com, Inc. has reached the elusive figure of 85 million members on its Prime service.

The Consumer Intelligence Research Partners (CIRP) determined that the company has just over 85 million members at the end of June 30, 2017, which is a 35% membership hike compared to 63 million members it had at the end of June 2016.

The year before that, Amazon Prime only had 40 million members, meaning its subscription service with free two-day shipping and other exclusive deals has been a hit with consumers.

Earlier this year, the company announced that it raked in $6.4 billion from “retail subscription services,” which likely applies to Prime. The company does not give out exact membership numbers for the service.

At the time, other analysts took this estimate to mean that the company has between 65 million and 80 million subscribers in Prime.

We’re also only a few days away from Amazon Prime Day, which is on Tuesday, July 11. The e-commerce retailer is advertising the day as having Epic Day Deals, with offers beginning the previous night–at 9 p.m. ET.

Blue Apron Shares Sink After Amazon Files Meal Kit Patent

July 17, 2017

Blue Apron Holdings Inc. (APRN) shares were down 7.7% in Monday premarket trading after Amazon.com Inc. (AMZN) filed a trademark for a meal kit service.

The filing has the word mark "We do the prep. You be the chef." And it describes the service as "Prepared food kits composed of meat, poultry, fish, seafood, fruit and/or and vegetables and also including sauces or seasonings, ready for cooking and assembly as a meal." The description also includes "frozen, prepared, and packaged meals," soup and salad ingredients, advertising and "business management for others of retail and online retail stores and supermarkets," customer loyalty programs and other services.

Amazon already offers meal kits, such as one from Sequential Brands Group Inc.'s (SQBG) Martha Stewart brand. Blue Apron shares are down 21.2% for the month to date while Amazon shares are up 3.5% for the period.

Amazon's latest assault wipes $13 billion off Home Depot, other appliance seller stocks

• Stocks of retailers that sell appliances were hit hard Thursday after Amazon said it would sell Sears' Kenmore brand appliances.
• Whirlpool, which makes appliances under the Whirlpool and Maytag brands, was also slammed, but the company also makes some appliances under the Kenmore brand.
• Some analysts saw a buying opportunity in home improvement stocks, Home Depot and Lowe's, among the best performers in the retail space and so far viewed as 'Amazon-proof.'