Amazon's Key Q2 Focus: Online Shopping and AWS Businesses

Analysts are eagerly anticipating Amazon.com Inc.'s upcoming second-quarter earnings report, particularly the performance of its online shopping and AWS businesses. The outcome of these sectors will hold significant implications for the overall health of both the retail and cloud markets, which are considered vital economic engines. Here's what to keep an eye on:

Earnings:

According to analysts tracked by FactSet, Amazon is projected to report earnings of 35 cents per share, a significant improvement from the loss of 20 cents per share reported in the same period last year. The average projection from Estimize, which crowdsources predictions from hedge funds, academics, and others, also anticipates 35 cents per share in earnings.

Revenue:

FactSet's consensus estimate indicates a revenue of $131.5 billion, surpassing the previous year's $121.2 billion. Similarly, contributors to Estimize expect revenue to reach $131.5 billion.

Stock Movement:

Amazon's shares have demonstrated an impressive 53% increase this year, with approximately half of the gains achieved in the last six months. In contrast, the S&P 500 has risen by 17.5% during the same period in 2023.

Of the 54 analysts tracked by FactSet who cover Amazon shares, 35 have buy ratings, four have overweight ratings, three recommend holding, and two have sell ratings. The average price target stands at $145.29.

Key Factors to Watch For

Evercore ISI analyst Mark Mahaney highlights three major factors that will heavily influence Amazon's performance going forward. Firstly, analysts will pay close attention to retail margin recovery as the company takes measures to regionalize its operations. Secondly, retail sales recovery will be evaluated, taking into account improvements in shipping efficiency. Finally, the acceleration of AWS revenue growth will be a key metric to track.

Artificial Intelligence (AI) remains a focal point for Amazon, reflecting a broader trend among major tech companies. In fact, Rohit Kulkarni, managing director of Roth MKM, believes that Amazon is positioned as the leading internet company among mega-cap companies to benefit from generative AI in the near future, ranking ahead of Facebook parent Meta Platforms Inc. and Alphabet Inc.'s Google.