Amazon (NASDAQ:AMZN) will report its Q4 earnings on Thursday, February 2. Given the negative impact of inflation and rising interest rates on consumer spending, Amazon’s Q4 revenue growth could decelerate further. Also, adverse currency movements will likely remain a drag.
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Amazon expects its Q4 revenues to increase by 2% to 8% year-over-year. The guidance includes a negative impact of 460 basis points from the foreign exchange rates.
Further, the outlook indicates a deceleration in top-line growth compared to Q3. In the third quarter, Amazon’s net sales increased by 15%. It’s worth highlighting that Amazon’s top-line growth has moderated in the last two consecutive quarters.
Amazon’s sales are likely to remain pressured, so its bottom line could significantly decline. Analysts expect AMZN to post earnings of $0.18 per share, compared to $1.39 in the prior-year period.
Analyst Weighs In
Wedbush analyst Michael Pachter expects Amazon’s Q4 sales to come to around $144 billion, which is the mid-point of the guidance range. He sees Q4 sales missing his and the consensus estimates of $148.3 billion and $145.4 billion, respectively.
Pachter expects Amazon’s top line to benefit from the momentum in AWS (Amazon Web Services) revenue. Moreover, the first-ever Prime Early Access Sale in Q4 will likely support revenues. However, the Prime Early Access sales could pressure margins.
Nevertheless, Pachter is bullish about AMZN stock and expects the company to benefit from subscription expansion, advertising revenue growth, a focus on driving high-margin third-party sales, and strength in AWS. Moreover, Amazon’s emphasis on cutting costs augurs well for future growth.
Pachter recommends a Buy on AMZN stock with a price target of $140.
Is Amazon a Good Stock to Buy?
While near-term headwinds could hurt its financials, Wall Street is optimistic about Amazon stock. With 30 Buys and three Holds, AMZN stock carries a Strong Buy consensus rating on TipRanks.
Meanwhile, analysts’ average price target of $133.48 implies 29.43% upside potential.
