Shares of Amazon AMZN are down roughly 11% in the last three months and rest 13% below their 52-week highs heading into the company's Q3 earnings release on Thursday, October 24. This recent downturn could give Amazon stock room to run if it is able to impress Wall Street.
Quick Amazon Overview
Amazon needs no introduction these days, as the e-commerce giant continues to expand further into everything from logistics to pharmaceuticals. Investors have rewarded the Seattle firm for its ambition for years, but AMZN stock is down 2.7% in the last 12 months. Meanwhile, all of the other so-called FAANG stocks, aside from Netflix NFLX, have outpaced the S&P 500’s 6% expansion during this stretch.
It seems hard to believe that Amazon’s recent downturn will continue, but stranger things have happened. Plus, Wall Street and investors might have to start to treat Jeff Bezos’ behemoth more like the mature firm that it is and not a high-growth upstart. Still, despite what appears to be slowing growth, we are likely years away from Amazon paying a dividend like Microsoft MSFT or Apple AAPL.
Q3 Outlook & Beyond
Amazon’s Q3 sales are projected to climb 21.2% from $56.58 billion in the year-ago period to hit $68.57 billion, based on our current Zacks Consensus Estimates. This would top Q2’s 20% sales growth, as well as Q1’s 17% and Q418’s 19.7%. However, Q3 looks poised to mark a significant slowdown from Q3 FY18’s 29% revenue growth.
AMZN’s full-year fiscal 2019 sales are projected to pop 19.6%, with 2020 expected to come in 18.2% higher. Once again, these estimates represent slower expansion compared to Amazon’s roughly 30% top-line growth between 2016 and 2018, but come in near 2015’s 20.2% growth and 2014’s 19.5%.
Meanwhile, AMZN’s adjusted Q3 earnings are projected to fall 23.3% to $4.41 per share. Despite this projected quarterly decline, Amazon’s full-year fiscal earnings are expected to jump over 17%, with 2020 expected to surge 37% higher.
The success of the company’s high-margin cloud computing division, known as Amazon Web Services, allowed the e-commerce firm to expand into other areas. Today, AWS remains the largest player in the quickly-expanding space.
Last quarter, AWS revenue climbed 37% to $8.381 billion. As one might have guessed, this represented the unit’s slowest expansion in the trailing six periods, when AWS averaged 45% growth.
With this in mind, our Key Company Metrics call for Amazon’s cloud segment to pull in $9.125 billion this quarter, which would mark a roughly 37% surge from Q3 2018’s $6.679 billion.
Moving on, Amazon’s subscription services leg features annual and monthly fees associated with Amazon Prime memberships, along with digital music, audiobook and other non-AWS subscription services. AMZN keeps some figures close to the vest, including the number of Prime members, who pay $12.99 per month for retail deals, delivery perks, and Prime Video.
Amazon Prime is said to have over 100 million users worldwide. Still, Wall Street will want to see this figure continue to expand as Walmart WMT, Target TGT, and others prove they can thrive in the e-commerce age.
Segment revenues are projected to climb approximately 35% from $3.698 billion in Q3 2018 to hit $4.980 billion. This would nearly match last quarter’s 37% growth. But it would fall way short of the prior-year quarter’s 52% expansion and the company’s 46% average over the trailing five periods starting in Q1 2019.
One of Amazon’s newer business segments is its “other” division, which “primarily includes sales of advertising services.” In fact, AMZN is projected to grab the third-largest share of U.S. digital ad dollars in 2019, behind only Google GOOGL and Facebook FB, according to eMarketer.
AMZN’s ad-heavy “other” division’s sales are projected to jump 37% to reach $3.421 billion, which would match Q2’s surge.
Amazon stock is a Zacks Rank #4 (Sell) at the moment, based in large part on its recent negative earnings estimate revision activity (which could change as we get closer to its release).
Yet, with shares of AMZN down more than 10% from their 52-week highs, it is not too hard to imagine Amazon bouncing back when it reports its Q3 2019 results after the closing bell on October 24 (also read: Solid Start to Q3 Earnings Season).
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Click to get this free report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Netflix, Inc. (NFLX) : Free Stock Analysis Report Facebook, Inc. (FB) : Free Stock Analysis Report Alphabet Inc. (GOOGL) : Free Stock Analysis Report Apple Inc. (AAPL) : Free Stock Analysis Report Microsoft Corporation (MSFT) : Free Stock Analysis Report Walmart Inc. (WMT) : Free Stock Analysis Report Target Corporation (TGT) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research