Amazon Stock To Edge Past The Consensus In Q4

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Amazon

Amazon (NASDAQ: AMZN) is scheduled to report its fiscal Q4 2022 results on Thursday, February 2, 2023. We expect Amazon to edge past the consensus estimates of earnings and revenues. The company missed the street expectations in the last quarter, despite a 15% y-o-y growth in the top line. While the revenues increased in all the categories, the online store segment witnessed a drop in growth rate as compared to the 2021 levels. It was due to tough macroeconomic conditions and the normalizing of retail consumer behavior after the re-opening of offline retail stores. We expect the Q4 results to be primarily driven by amazon web services, third-party seller services, and advertising services.

Our forecast indicates that Amazon’s valuation is $139 per share, which is 36% above the current market price of around $102. Our interactive dashboard analysis on Amazon’s Earnings Preview has more details. 

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(1) Revenues to marginally beat the estimates

Amazon’s revenues increased 10% y-o-y to $364.8 billion in the first three quarters of 2022. 

  • The company posted positive growth in physical stores (13%), third-party seller services (11%), subscription services (10%), advertising services (22%), and AWS (32%) segments. We expect the same trend to continue in Q4. 
  • The online store category saw a marginal dip in revenues over the first nine months. Notably, the unit contributes close to 50% of the total revenues. We expect the weakness to continue in Q4 as well.
  • Overall, we estimate Amazon’s revenues to remain around $511.5 billion for the full-year 2022.

Trefis estimates Amazon’s fiscal Q4 2022 net revenues to be around $146.68 billion, marginally above the $145.37 billion consensus estimate.

(2) EPS is likely to beat the consensus estimates

Amazon Q4 2022 adjusted earnings per share (EPS) is expected to be $0.18 per Trefis analysis, just above the consensus estimate of $0.17. The adjusted net income decreased from $19 billion to -$3 billion in the first nine months of 2022. It was partly due to higher operating expenses as a % of revenues and a significant jump in other expenses (net). Notably, other expenses increased due to a marketable equity securities valuation loss from equity investment in Rivian Automotive. We expect the Q4 results to follow the same trend. Overall, Amazon is likely to report an annual GAAP EPS of -$0.12 and revenue per share (RPS) of $50.09 for the full-year 2022. 

(3) Stock price estimate is 36% more than the current market price

We arrive at Amazon’s valuation, using an RPS estimate of around $50.09 and a price-to-sales (P/S) multiple of just below 3x in fiscal 2022. This translates into a price of $139, which is 36% above the current market price of around $102. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

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 Returns Jan 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 AMZN Return 22% 22% 173%
 S&P 500 Return 6% 6% 82%
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[1] Month-to-date and year-to-date as of 1/30/2023
[2] Cumulative total returns since the end of 2016

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