Amazon earnings, a big surprise could be in store
Amazon’s first-quarter earnings are expected to decline even with growing revenue as the giant online retailer invests heavily to expand its offerings and its global reach.
The company is expected to post first-quarter earnings of $1.26 per share on revenue of $49.88 billion when it reports on Thursday. In the same quarter a year ago, Amazon earned $1.48 per share on revenue of $35.7 billion.
Upsized expectations are normal for the company, but this time around earnings are expected to decline, despite rising revenue, as the company boosts capital spending to grow its Amazon Web Services (AWS), Prime and Alexa devices.
Amazon CEO Jeff Bezos disclosed in a letter to shareholders last week that Amazon Prime has more than 100 million paying subscribers worldwide, and that revelation relieved some of the pressure that the company has been under after a series of tweets from President Trump suggested that the company could face increased regulation.
The 100 million subscribers is a clear piece of evidence of how quickly the company has been expanding its reach. But, some wonder how long this trajectory can continue. Of note, the U.S. has about 126 million households. According to Forbes, citing information obtained at the Internet Retailers Conference and Exhibition, 80 million households in the U.S. have Amazon Prime.
Bezos, in his shareholder letter, talked up international expansion in places like India as a means for continued growth.
“Amazon’s growth has been breathtaking and impressive, but there is no way they can continue at that scale,” said Pete Killian, partner at Vivaldi, a business consultancy and branding company. “They need to find $25 billion-plus of topline growth every year to maintain their growth rate, and at some point that outstrips the speed of consumers’ behavior change. So the ‘hole’ in the 100 million number is that it’s the victim of its own success: there really is not much higher to go,” Vivaldi told MarketWatch.
Many companies have been somewhat uninspired by earnings so far this season, reporting beats but then shares have fallen in the aftermath.
Analysts have an average 12-month price target on Amazon of $1,674.
