Reports Q4 2021 results on Thursday, February 3, after market close
Income forecast: $137.75 billion
EPS forecast: $3.71
There hasn't been much excitement about Amazon.com (NASDAQ:) inventory over the past 52 weeks. During that period, the e-commerce giant's shares lagged other mega-cap technology stocks and the broader ones, with its share dropping 11.3% year over year. Shares closed at $3,012.25 Wednesday.
Investors are concerned that rising spending and supply-side hurdles are becoming increasingly heavy. Amazon warned in October that it could have up to $140 billion in revenue in the busy holiday quarter with the potential for zero profits.
These factors are likely to reappear when the Seattle-based company releases its fourth quarter figures later today.
Amazon expects operating income for the three months ended December 31 to be between breakeven and earnings of $3 billion, down from $6.9 billion a year ago.
New Chief Executive Andy Jassy faces a critical challenge to keep millions of Amazon Prime customers happy as supply-side hurdles, labor shortages and increased freight and shipping costs spread globally.
But while the current environment doesn't look too favorable for Amazon's e-commerce business, investors shouldn't ignore the strong momentum in the company's other units, including the ad segment and Amazon Web Services earnings. (AWS). ), the company's cloud unit.
Sales of the cloud unit, which provides customers with server capacity and software tools and generates a significant portion of the operating profit, is growing tremendously. Figures point to a 39% growth in the third quarter compared to the same period a year ago.
Amazon's digital advertising business, which competes with Alphabet's (NASDAQ:) Google and Meta Platforms (NASDAQ:), grew 50% in Q3.
Analysts are still optimistic
That is the main reason most Wall Street analysts remain optimistic about the company's long-term prospects and its leading position in e-commerce. Morgan Stanley released an optimistic report on Amazon last month, predicting a 30% gain for the stock.
Meanwhile, the Bank of America named Amazon the top pick for 2022 in its note, saying Amazon would enjoy a "significant" expansion in profit margins from 2023 to 2025, aided by its cloud, advertising and third-party services. party marketplace.
Added the note:
"We continue to favor Amazon as our top FANG stock in 2022 with the view that 1Q will be a low for growth and y/y margins."
Analysts' confidence in Amazon stock is so strong that only 2 out of 52 polled by Investing.com gave it a "neutral" rating, while the rest rated Amazon "performed" with a 12-month price target implying an average increase of 35.7%.
Source: Investing.com
Bottom Line
Cost escalations and supply-side hurdles could continue to squeeze Amazon's margins for a few quarters. But this weak period presents a buying opportunity for sideline investors, given the company's rapidly growing revenues from its cloud and advertising businesses, along with its still dominant position in the e-commerce segment.
