Here’s what Wall Street is saying about Amazon ahead of earnings

Amazon (AMZN) is scheduled to report results of its first quarter of 2024 after the market close on Tuesday, April 30, with a conference call scheduled for 5:30 pm ET. Here’s what to watch for:

EXPECTATIONS: For the first quarter, Amazon has said net sales are expected to be between $138.0B and $143.5B, or to grow between 8% and 13% compared with the same quarter of last year. The company expects to see anywhere from $8.0B to $12.0B in operating income for Q1, compared with $4.8B in the same quarter of last year.

Along with the company’s last report, Amazon CEO Andy Jassy said Q4 was “a record-breaking Holiday shopping season and closed out a robust 2023 for Amazon.” Jassy added: “While we made meaningful revenue, operating income, and free cash flow progress, what we’re most pleased with is the continued invention and customer experience improvements across our businesses. The regionalization of our U.S. fulfillment network led to our fastest-ever delivery speeds for Prime members while also lowering our cost to serve; AWS’s continued long-term focus on customers and feature delivery, coupled with new genAI capabilities like Bedrock, Q, and Trainium have resonated with customers and are starting to be reflected in our overall results; our Advertising services continue to improve and drive positive results; our newer businesses are progressing nicely, and along with our more established businesses, collectively making customers’ lives easier and better every day. As we enter 2024, our teams are delivering at a rapid clip, and we have a lot in front of us to be excited about.”

Current consensus EPS and revenue forecasts for Amazon’s March-end quarter stand at 82c and $142.53B, respectively, according to data from Zacks.

AWS: Last quarter, Amazon reported Amazon Web Services net sales of $24.2B, which was up from $21.4B in the same quarter of the prior year. AWS operating income rose to $7.17B from $5.21B in the prior year period.

In a recent preview note, BofA told investors it expects AWS and advertising upside compared to Street estimates, adding it also sees potential for a retail beat. For AWS, BofA estimates 16% year-over-year growth, versus the Street forecast at around 15%. For Q2, the firm lowered its revenue forecast by $1.5B to $149.9B given recent U.S. dollar depreciation and what it sees as a possible “modest pull-forward in demand” due to the timing of Easter and Amazon’s “Big Spring Sale” event in March.

SPRING SALE NOT SO BIG: In its own note published on April 2, JMP Securities told investors that Amazon’s “Big Spring Sale” event likely had “little” impact on Q1 numbers, with third-party data suggesting the event saw less of an impact relative to Prime Day and pointed to sales fatigue, a financially limited consumer, and low levels of awareness. While the event likely drove some incremental sales volume and throughput on Amazon’s fulfillment network, JMP would not expect the sales event to have as meaningful of an impact as Prime Day. The firm made no change to its Outperform rating or $225 price target at the time of its note.

AI UPTAKE: In February, Tom Dotan of The Wall Street Journal said that Microsoft’s (MSFT) new AI had been used by testers for over six months and the reviews were in, with many saying it did not live up to the price. Copilot, Microsoft’s AI assistant, is an upgrade that plugs into Word, Outlook, and Teams, using its technology to summarize emails, generate text, and create documents. So far, the software has many shortcomings, including Excel, PowerPoint, and its tendency to make mistakes, giving pause to many on whether $30 a head is worth the price, the report stated.

More recently, The Information’s Aaron Holmes reported that as many businesses remain cautious about spending on conversational artificial intelligence, AI providers such as Microsoft, OpenAI and Google (GOOGL) are racing to make the technology more of a must-have by introducing new features that can handle complex tasks with little guidance from the customer. Microsoft, for instance, is making software to automate multiple actions such as creating, sending and tracking a client invoice based on their order history or rewriting an application’s code in a different language and verifying that it works as intended, according to employees. The new software, which OpenAI technology will power, will improve upon Microsoft’s current suite of Copilots, the author says.

DA Davidson recently raised the firm’s price target on Buy-rated Amazon to $235 from $200. The firm notes that the stock is its “favorite mega cap”, calling for a year of positive trends in AWS as well as Retail profitability. AWS investments in data centers and their custom chips set it up well for the next leg of growth from GenAI, the analyst told investors, adding that outside of Microsoft’s investment in Azure, no other competitor will even approach the reported $150B in data center investment by Amazon over the next 15 years.

Along with their own recent earnings previews, analysts at Wedbush and Citi also raised their price targets on Amazon shares.

Wedbush analyst Scott Devitt raised the firm’s price target on Amazon to $225 from $220 and keeps an Outperform rating on the shares ahead of quarterly results. The firm thinks Amazon is well positioned this year with multiple drivers of sustainable margin expansion in place. The company has reported operating income ahead of Street estimates for five consecutive quarters, and Wedbush estimates Q1 operating income of $11.6B, approximately 5% above consensus. The firm is looking for sustained advertising momentum given positive feedback from advertisers in its Q1 Digital Advertising Survey and from digital advertising agencies, accelerating AWS growth and incremental commentary on AI-related demand, and ongoing improvements in both North America and International retail margins.

Citi analyst Ronald Josey raised the firm’s price target on Amazon to $235 from $215 as the analyst “materially” raised operating income projections following an analysis of the company’s Advertising and Retail businesses. Citi now projects operating income to reach 10% margins in 2025 on continued advertising strength and improving retail efficiencies. Given faster shipping speeds, the firm believes conversion rates are improving as Amazon’s retail business benefits from its regionalization approach with shorter transport distances as the overall cost to serve comes down. Amazon remains one of its top picks across the internet sector.

SENTIMENT: Check out recent Media Buzz Sentiment on Amazon as measured by TipRanks.