Amazon Earnings Preview: Positive Trends Continue
Amazon [[AMZN]] shares could see a nice jump when the ecommerce stock reports their first quarter 2010 results after the market closes on Thursday, April 22.
First quarter expectations tend to be rather muted for ecommerce and retail stocks, but that offers greater upside for investors when the companies are able to exceed expectations. Last April, Amazon delivered first quarter earnings results that were 10% ahead of consensus estimates. The next day AMZN shares climbed nearly 5% on the earnings news.
Compete analytics shows that traffic grew 15% y/y in the first quarter and was relatively flat with the fourth quarter. The growth in site traffic is further strengthened by recent ecommerce data from comScore.
We expect that Amazon’s strong first quarter growth will again be driven by Kindle sales and consumer electronics. Last month, Best Buy [[BBY]] reported 12% y/y growth which we believe bodes well for Amazon’s results.
Amazon’s shares gained an incredible 162% in 2009, and was one of the best performing stocks in the internet sector (Priceline, Expedia and VistaPrint managed to delivered ever higher returns). However, Amazon’s stock has been fairly muted this year, gaining less than 6% while the Nasdaq has climbed over 9%.
On January 26, Amazon provided first quarter sales guidance of $6.45 – $7.0 billion and operating income of $275 – $365 million. The current Wall Street consensus estimates are for revenues of $6.86 billion and EPS of $.62. We at EarningsPreviews.com are anticipating better results at the high-end of management’s guidance range with revenue of $6.96 billion and $.70 EPS.
Amazon is now trading at 37x consensus 2011 EPS estimates. This is above the relative valuations of their peer group. We are forecasting a solid earnings beat from Amazon this quarter and would expect to see at least modest gains in the stock price on the earnings news.