Amazon.com Earnings Preview: Second Quarter 2009

Amazon.com [[AMZN]] is scheduled to report their second quarter 2009 results after the market closes on Thursday, July 23. Based on our analysis, we at EarningsPreviews.com are expecting AMZN to report better than expected results that exceed Wall Street’s consensus expectations.

 

Analyst Expectations

We are forecasting revenues of $4.71 billion and EPS of $.34. This would represent a 16% increase in revenues from last year’s $4.06 billion in the same period. The current analyst consensus estimates calls for revenues of $4.68 billion and EPS of $0.31. On April 23, the company provided second quarter revenue guidance of $4.30 – $4.75 billion which represents a y/y growth rate of 6 – 17%.

 

While the retail environment continues to be quite bleak in the face of an economic recession, Amazon.com continues to post stellar growth. In each of the last two quarters, the company has managed to post 18% top-line growth. We are anticipating that growth rate to slow this quarter, but are still expecting a very impressive 16% y/y growth rate. Shoppers are continuing to flock to Amazon’s website, and we believe that traffic growth was close to 20% in the second quarter.

 

Kindle sales continues to exceed even the most optimistic expectations. With the economy beginning to show signs of recovery, we are comfortable that Amazon will be able to achieve Wall Street’s earnings expectations for the second half of the year.

 

Share Performance

Since the beginning of the year, Amazon’s shares are up 67%. In 2008, AMZN’s shares fell 45% and underperformed the 34% decline in the Dow Jones industrial average.

 

Valuation

Shares are now trading at 41x consensus 2010 EPS estimates. This is a rich premium to the relative valuations of their peer group. Growth investors have to love Amazon’s operating performance during this economic recession. With projected earnings growth of over 25% next year, we would anticipate Amazon’s share price to top $100 once again in the next few months.

 

Recommendation: Buy with a $95 price target.

 

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