Amazon stock (Nasdaq: AMZN) appears "primed" for its Q2 2014 earnings set for release later today (Thursday) - shares were up 0.56% as of 3 p.m. EDT.
Amazon.com has beaten earnings per share (EPS) forecasts 56.4% in the last 10 years, according to CNBC. It has beaten revenue forecasts 66.8% of the time. AMZN stock has historically gained or lost 9.5% the day after its earnings release (which always takes place after market close), according to Bespoke research.
Today, the Seattle, Wash.-based retail giant will try to beat expectations for second-quarter EPS loss of $0.15 on revenue of $19.34 billion. A year ago in the same quarter, AMZN reported a $0.02 loss per share on revenue of $15.7 billion. That means Q2 would post a 23% higher revenue than in 2013.
That the company will post an EPS loss isn't a surprise.
"Amazon is not going to turn a profit. We already know that," Keith Bliss, senior vice president and director of sales & marketing at Cuttone & Co., said to IBTimes.
Citigroup appeared more skeptical when it downgraded Amazon from "Buy" to "Neutral" on Tuesday.
"While we believe that the core retail business is performing well and posting solid revenue growth and bottom-line leverage, we believe earnings and the stock could remain under pressure during this period of aggressive investment in AWS [Amazon Web Services] as many investors have become frustrated by AMZN's lack of leverage (continued aggressive investment) and lack of transparency," Citigroup analyst Mark May wrote in a note to investors.
But our own Money Morning Chief Investment Strategist Keith Fitz-Gerald shared similar sentiments with Bliss earlier this year.
"I don't care whether Amazon misses, I just care that it's the company's status quo," he said. "With Amazon, I'll take anything but no big surprises - only if there's a big surprise would I be concerned."
Here are the top numbers to watch when Amazon earnings are released after closing bell...
Amazon Stock Will Gain or Lose 9.5% on These NumbersWhat Bliss has his eye on today is revenue growth.
"The metric that everybody looks for is their year-on-year revenue growth. Early channel checks suggest that they're going to have 24% to 25% year-on-year revenue growth, which is outstanding."
But we can be more specific than just revenue growth.
Market research firm Trefis is expecting Amazon's momentum in the electronics and general merchandise segment to fuel revenue with a continuation of its 25% growth rate. It's also calling for "stellar growth" in web services, "driven by new product launches and continued adoption of existing products among clients." Web services includes Amazon's cloud infrastructure, which gives the company a competitive foothold into the corporate market.
"[Amazon] launched a bunch of products to strengthen this segment during the second quarter of 2014," Trefis wrote earlier this week. "It introduced an SSD-backed storage service that saves money for customers without sacrificing on speed. The service is aimed at personal users and small/medium sized enterprises. While targeting large enterprises is important, there is a huge opportunity for Amazon to expand its cloud storage and computing business by going for smaller companies which tend to be more flexible. The retailer launched two more new products including new capability for mobile developers. In Q1 2014, Amazon's 'Other' segment revenues jumped by 58%. Most of the sales from this reported segment can be attributed to Amazon's web services."
Web services isn't Amazon's only segment pumping out product in 2014.
So far this year, the company has already released a set top box, a wand for shopping with Amazon Pantry, a new, unlimited e-book subscription, and its own music streaming product. And on Friday, Amazon will launch the Fire Phone, its first foray into smartphones. It connects simply and directly with Amazon's library of wares - videos, books, music, and apps - and it's the easiest way to buy merchandise from Amazon.com.
"These guys leave no stones unturned for the next dollar they can bring in," Money Morning Defense & Tech Specialist Michael A. Robinson said earlier this year. "Amazon is constantly upselling, cross-selling, and looking for new products, and they're great at it. Once this franchise is built out, there are billions of dollars in cash flow that will fall to the bottom line."
Investors should be watchful today for details about how these new additions are performing.
As for how to play Amazon stock right now, stay focused on revenue and growth, and don't let the lack of profits shake you - just be cautious.
"Amazon is so rich compared to its earnings. I think it won't go away anytime soon, and it's going to change the world - but it makes you think twice about investing, because if the company does ever take a hit, it's the investors that would bear the brunt of it," Fitz-Gerald said.
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