Amazon (AMZN) will report third quarter results this afternoon and management will host a call at 17:30.
Heading into second quarter results, concerns over slowing revenue growth were offset by expanding operating margins and increasing earnings power.
Second quarter results were muted and Amazon missed earnings estimates, although operating income was just below the midpoint of its guidance range. The company also guided third quarter operating income below consensus with the midpoint of revenue above consensus.
Both of Amazon's most profitable businesses slowed to 37% growth in the second quarter, excluding FX.
Amazon Web Services (AWS) is the largest public cloud computing business with a first mover advantage, but Microsoft's Azure is gaining ground. AWS revenue grew 37% to $8.38 bln in the second quarter on top of 49% growth in the second quarter of 2018. That is awfully impressive growth at a $34 bln run rate, but Microsoft is growing faster (+53% in Q3).
Prime One Day shipping is expected to lead to operating margin contraction and an acceleration in revenue growth for the second consecutive quarter.
Analysts expect third quarter operating income down 20% to $2.99 bln, with EPS down 22% to $4.49 and revenue up 21% to $68.72 bln. Amazon guided for third quarter operating income of $2.1-3.1 bln on revenue of $66-70 bln.
The Street expects fourth quarter operating income up 10% to $4.18 bln with revenue up 20% to $87.17 bln.
TECHS:
With a market cap of ~$880 bln, the stock trades at ~19x forward cash flow estimates, a premium to it’s peers.
AMZN has been consolidating for more than a year, the stock has been finding resistance at its 50 and 200-day moving averages more recently.
The options market implies a 4% move in the stock tomorrow.
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