Amazon (AMZN) to Report Q3 Earnings: What's in the Offing?

Zacks Equity Research
·6-min read

Amazon AMZN is scheduled to report third-quarter 2020 results on Oct 29.

For third quarter, the company expects net sales between $87 billion and $93 billion. The figure is anticipated to improve in the range of 24-33% on a year-over-year basis.

The Zacks Consensus Estimate for third-quarter net sales is pegged at $92.8 billion, suggesting growth of 32.7% from the prior-year quarter.

Further, the Zacks Consensus Estimate for third-quarter earnings currently stands at $7.27 per share, up 0.3% over the past 30 days. However, the figure suggests an improvement of of 71.9% from the year-ago reported figure.

The company surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed the same twice. It has a trailing four-quarter earnings surprise of 132.03%, on average.

Prime, Retail Efforts & E-commerce Demand: Key Factors to Note

Amazon’s strengthening distribution network and Prime-enabled fast delivery services are expected to have aided the performance of its e-commerce business in the to-be-reported quarter.

Prime Free One Day service, Amazon Fresh, and robust two-hour delivery service of natural and organic products such as meat and seafood, fresh produce, and staples from the Whole Foods Market are expected to have driven customer momentum in the quarter under review.

Further,theimpacts ofAmazon’s aggressive stance on the core retail industry, especially grocery retail, is expected to get reflected in its third-quarter results.

The opening of Amazon Fresh grocery store, which marks the company’s new grocery store, and the first Amazon Fresh supermarket remained have been positives. These are expected to have contributed well to the company’s grocery sales in the to-be-reported quarter.

Along with in-store shopping, the option of online shopping at the Amazon Fresh supermarket, which offers same-day delivery as well as grocery pick-up service pertaining to customers’ orders, is likely to have driven growth in the company’s online grocery orders.

Furthermore, Amazon extended ties with Morrisons in the third quarter in a bid to make the latter’s full range available to Prime members on Amazon.co.uk. This is anticipated to have bolstered the company’s grocery drive in the U.K. in the quarter under review.

Apart from grocery retail, the company’s deepening focus toward the fashion business is expected to get reflected in its third-quarter results.

In the to-be-reported quarter, Amazon introduced a shopping experience called Luxury Stores on its e-commerce app in an attempt to offer various luxury fashion and beauty brands. This is expected to have been beneficial for the company in delivering a better shopping experience to customers in the quarter under review.

All these endeavors are likely to have strengthened Amazon’s competitive edge against retailers like Walmart WMT, Target TGT and Kroger KR in the to-be-reported quarter.

Additionally, Amazon has been witnessing increasing shopping orders during the ongoing pandemic, thanks to the fact that online retail has become an integral part of the new normal. This, in turn, is likely to have driven its top-line growth significantly.

Moreover, this is expected to have helped the stock in gaining investor optimism during the to-be-reported quarter.

Apart from the Prime-based retail benefits, expanding original content and the overall content portfolio on Prime Video are expected to have driven the Prime subscription in the to-be-reported quarter.

Amazon.com, Inc. Price and EPS Surprise

 

Amazon.com, Inc. Price and EPS Surprise
Amazon.com, Inc. Price and EPS Surprise

Amazon.com, Inc. price-eps-surprise | Amazon.com, Inc. Quote

Strengthening AWS Services

The impacts of the company’s expanding Amazon Web Services (AWS) portfolio are expected to get reflected in the third-quarter results.

In the third quarter, AWS made io2 for Amazon Elastic Block Store generally available. io2 is an advanced provisioned input/output operations per second SSD volume, which expands volume offerings of Amazon EBS that already provides four different types of volumes.
    
Further, AWS announced the general availability of Amazon Braket, which is a fully-managed service that allows customers to test and troubleshoot quantum algorithms on quantum computer simulators.

Furthermore, AWS Wavelength on Verizon’s 5G network was recently made generally available for users in Boston and San Francisco Bay Area.

Additionally, AWS made Contact Lens for Amazon Connect, Amazon Timestream, Amazon Fraud Detector, AWS IoT SiteWise and Amazon Interactive Video Servicegenerally available.

We expect all these initiatives to have helped Amazon in winning customers. This, in turn, is expected to have driven AWS’sthird-quarter revenues.

Expanding Smart Devices Portfolio

During third-quarter 2020, Amazon rolled out the next-generation Fire TV Stick and Fire TV Stick Lite, which is an all-new device, in order to bolster its streaming devices offerings.

Further, the company unveiled the mesh Wi-Fi systems, namely eero Pro 6 and eero 6, in a bid to expand its Wi-Fi devices offerings.

Also, the company expanded its smart home security camera offerings by introducing Blink Outdoor and Blink Indoor wireless cameras.

Additionally, the launch of the all-new Echo, Echo Dot, Echo Dot with clock, Echo Dot Kids Edition, and Echo Show 10 strengthened its smart speaker offerings.

Furthermore, Amazon made its foray into the promising fitness tracker and wearable market by launching Amazon Halo and Amazon Halo Band, the fitness tracking service and wearable, respectively.

We believe that the impacts of these product launches are expected to get reflected in the company’sthird-quarter result.

Currently, Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.

Click here for the 6 trades >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Target Corporation (TGT) : Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Walmart Inc. (WMT) : Free Stock Analysis Report
 
The Kroger Co. (KR) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research