Last Minute Thought: Buy or Sell Amazon (AMZN) Stock Before 3Q18 Earnings?

Dwayne Harmon
October 27, 2018

Amazon reported standout third-quarter earnings Thursday, but revenue and revenue guidance disappointed.

Analysts had expected third-quarter revenues of $57.1 billion in revenue, but Amazon reported $56.6 billion-which is still up 29% from a year ago.

The company posted third-quarter earnings per share of $5.75 on net income of $2.9 billion, topping expected earnings per share of $3.14, according to Refinitiv data.

The fall in shares, if replicated when USA stock markets open officially, would knock almost $90 billion off Amazon's market value and relegate it behind Microsoft and Apple in terms of market value. Analysts projected $US3.9 billion. The company also issued weaker than expected revenue guidance. As part of its earnings call, the company also warned that its fourth quarter would likely do the same, despite including the busy holiday season. Analysts had forecast $US3.11 per share.

Shares were set to open down nearly 9% on Friday.

Devitt noted, "Our 3Q:18 topline estimate of $57.1B is in line with consensus expectations and near the high-end of the guided range ($54.0B- $57.5B)". The Street wanted to hear $73.79 billion, but Amazon forecast between $66.5 billion and $72.5 billion.

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But Alphabet's revenues fell short of forecasts, rising 21 percent to $33.7 billion in the three months ending in September, compared with the same period a year earlier. Its overall subscription revenue, which comes not just from Prime, but also from Audible.com, Amazon Music, and other services, grew 52% from the third quarter past year to $3.7 billion.

In a time of low interest rates, Amazon and Google have offered investors the chance to hitch a ride on the fast-growing e-commerce, digital advertising and cloud-computing markets buoyed by a steady global economy, Bloomberg explained. "And we're not slowing down - Amazon Business is adding customers rapidly, including large educational institutions, local governments, and more than half of the Fortune 100". It purchased online pharmacy PillPack in June, which followed its US$13.7 billion acquisition of Whole Foods past year to jump start its grocery business.

This healthy figure represents a 122% increase year over year and a jump of $301m from the last quarter, putting Amazon on track to hit the psychologically important $10bn a year mark in annualised sales for the sector.

The company now groups its advertising group under "other" on its balance sheet.

Amazon shares were down 4.7 percent to $1,697 at time of publication Thursday afternoon. About half of our Diwali sales past year were in Q3.

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