Amazon (NASDAQ:AMZN) is gearing up for a busy few months ahead. The AWS re:Invent, set for December 2-6, is expected to draw attention, where all eyes will most likely be on the gen AI opportunity. Moreover, the holiday shopping season, Amazon’s most profitable time of year, is just around the corner.
Before that, however, the spotlight will be on Amazon’s Q3 earnings report, due next Thursday (October 31). After delivering mixed results in Q2, the big question is whether the e-commerce titan will satisfy investors’ expectations this time around.
Monness’ Brian White, an analyst ranked in the top 1% of Wall Street stock experts, sees revenue hitting at least $157.17 billion while projecting EPS of $1.14. Those estimates are about the same as the Street’s, which stand at $157.19 billion and $1.14, respectively. White also expects Q3 operating income of $15.15 billion and the operating margin to clock in at 9.6%.
White reminds investors that EPS could be impacted by fluctuations in Rivian Automotive’s share price and non-operating charges. As the largest shareholder of Rivian, with ownership of 158.36 million shares, Amazon remains sensitive to these market swings.
White’s forecast of 10% topline growth matches the uptick seen in Q2. On a sequential basis, however, the Q3 revenue forecast amounts to a 6% QoQ improvement, which is better than the four-year September quarter average of a 4% gain. Amazon, for its part, is calling for revenue in the range between $154.0-158.5 billion and operating income in the $11.5 billion to $15.0 billion range.
For Q4, White is expecting a guide of $185.55 billion at the topline (Street is at $186.13 billion) and EPS of $1.42 vs. consensus at $1.34.
Zooming out beyond the results, White notes that by “improving efficiencies” and launching new initiatives, Amazon remains “laser-focused on lowering its cost-to-serve.”
Last year, the company started regionalizing its U.S. fulfillment network, which has been a big success so far. Now, it is extending this effort to regionalize its U.S. inbound network.
“Given this challenging economic environment,” the 5-star analyst summed up, “we expect consumer spending patterns to remain restrained, driving those customers shopping on Amazon to remain price sensitive with a focus on essential items. This includes trading down to lower-ASP products, searching for deals, and demonstrating restraint with high-ASP, discretionary items.”
Ultimately, though, what does this all mean for investors? White rates Amazon shares a Buy alongside a $225 price target. Should the figure be met, investors will be pocketing returns of ~22% a year from now. (To watch White’s track record, click here)
Overall, while two of White’s colleagues are neutral on AMZN, the broader consensus is overwhelmingly bullish. Out of 48 recent ratings, 46 are positive, leading to a Strong Buy consensus. The average price target of $224.16 closely mirrors White’s objective. (See AMZN stock forecast)
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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.
