Tech giants are in the spotlight this week, with many market leaders releasing their Q4 earnings reports. Among them, Amazon (NASDAQ:AMZN) is scheduled to announce its fourth-quarter financial results on Thursday, August 1, after the market closes.
Following disappointing earnings from tech luminaries Alphabet and Tesla, will Amazon also fall short of expectations?
Not likely, says Truist’s Youssef Squali, who ahead of the print remains “constructive on Amazon.” The 5-star analyst cites several reasons for this confidence: strong North American sales, as indicated by Truist Card Data; positive trends in the ads business; expected growth acceleration in AWS; and improving unit economics and Opex management, which should enhance margins and profitability.
Squali’s analysis of Truist Card data for the quarter indicates that Amazon’s U.S. revenue surpassed the Street’s estimate of $90.04 billion, reaching approximately $92.5 billion. Consequently, the analyst has revised his Q2 2024 North America revenue estimate from $90.7 billion to $92.2 billion. On a monthly basis, Squali observed that sales trends accelerated in April compared to March, experienced a slight deceleration in May, and then stabilized in June.
The improved outlook for North America has resulted in Squali raising his total revenue forecast. The analyst now sees revenues hitting $150.1 billion, amounting to a 12% year-over-year increase vs. $148.7 billion (+11% YoY) beforehand. That is also above the high-end of Amazon’s guided range of $144 – 149 billion and higher than the Street’s forecast of $148.6 billion.
At the other end of the spectrum, as Amazon “continues to drive down its cost to serve,” Squali anticipates operating margins will keep on improving across both North America and International.
As “structural improvements” to the cost base take effect, Squali sees Amazon’s operating margins once more showing significant year-over-year expansion.
“Amid a weakening consumer,” the 5-star analyst summed up, “Amazon continues to gain share of global ecommerce and improve its value proposition to both merchants and consumers. We see multiple growth vectors powering AMZN’s growth which keeps the stock compelling, in our view.”
Accordingly, Squali rates Amazon shares a Buy, along with a $230 price target, suggesting the stock will gain ~26% over the coming months. (To watch Squali’s track record, click here)
Overall, Amazon claims the unique feat of being a name with a huge amount of coverage and all of it positive. Based on a unanimous 44 Buys, the stock naturally claims a Strong Buy consensus rating. At $224.71, the average price target makes room for 12-month returns of ~23%. (See Amazon stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
