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- Amazon is set to report its earnings for the fourth quarter after the closing bell on Thursday.
- The growth of Amazon’s cloud unit, AWS, will be in focus, along with its retail business.
- Here’s what Wall Street expects to hear from Amazon on Thursday.
Amazon is set to report its fourth-quarter earnings after the market close on Thursday, and investors will be looking for solid results to help justify its 33% rally since the end of October.
Growth in Amazon’s AWS cloud unit, profitability levels in its retail division, and progress in growing its advertising and artificial intelligence business will be top of mind for Wall Street analysts.
Here are the quarterly figures Wall Street expects, according to data from Bloomberg:
- Revenue: $166.2 billion
- Adjusted earnings per share: $1.03
- GAAP earnings per share: $0.81
- Gross margin: 44.93%
The fourth quarter is historically Amazon’s strongest, as it encapsulates holiday spending from the consumer, as well as a Prime Day shopping event. Investors will be looking for any read throughs into the health of the consumer based on Amazon’s e-commerce results.
Here’s what Wall Street analysts are saying about Amazon’s upcoming earnings report.
Goldman Sachs: ‘AWS revenue growth will remain a key area of debate’
Goldman Sachs said in a note earlier this month that Amazon is well positioned to scale its profit margins in retail and grow even more efficient from a cost perspective. That should ultimately help the company beat analyst estimates when it reports its fourth-quarter results.
“We think that the company is not only well positioned to navigate the current volatile consumer environment but that Amazon’s eCommerce margins are on a trajectory of scaling in the years ahead as supply chains normalize and wage inflation subsides and as the company continues to reap the benefits of prior logistics investments,” Goldman Sachs said.
The bank expects Amazon to report revenue slightly ahead of estimates at $166.5 billion, and AWS revenue growth of 14%, which would represent an acceleration of growth from its reported 12% jump in the third-quarter.
“We view Amazon as well positioned as a leader in all aspects of secular growth within our Internet coverage and reiterate our Buy rating into 2024 with a PT of $200 (from $190),” Goldman said.
JPMorgan: ‘The stock can continue to climb higher’
Despite Amazon’s solid rally over the past three months, JPMorgan thinks there is still upside left in the stock.
“Amazon is most liked and most owned across our group, but that does not deter our view that the stock can continue to climb higher,” JPMorgan said in a note on Monday.
But further growth in Amazon’s stock price will not be without volatility, as JPMorgan’s channel checks suggest that its all-important AWS unit saw a softening in growth towards the end of the fourth-quarter and into the first few weeks of 2024.
“We model 13% growth in AWS in 4Q and believe the Street expectation is in the 12.5% to 13.0% range, based on our conversations,” JPMorgan said.
For the year, JPMorgan said it expects Amazon’s AWS cloud unit to grow 16.6% thanks to the integration of generative AI technology and new workloads.
JPMorgan reiterated its “Overweight” rating and $190 price target for Amazon.
Bank of America: ‘Expect retail to be a bright spot’
Bank of America said AWS growth will be “the most important metric” for investors to consider in Amazon’s upcoming earnings report, and that its fourth-quarter retail results should “be a bright spot,” according to a note last week.
“Bank of America aggregated credit and debit card data indicates eCommerce sales growth in 4Q was stable vs 3Q and Cyber Five data suggests Amazon gained share,” Bank of America said.
The bank expects Amazon to report $167 billion in revenue for the quarter, and that AWS will grow revenue 13% year-over-year to $24.2 billion.
“Lapping cost optimization and AI-driven demand are key drivers for AWS; we think it [is] important for management to call out potential for first-quarter acceleration on the call,” Bank of America said.
The bank reiterated its “Buy” rating and $185 price target.
Bloomberg Intelligence: ‘Advertising revenue may continue to grow at a 20%+ clip’
Analysts at Bloomberg Intelligence said building sales momentum should help the e-commerce giant to Wall Street estimates when it reports earnings results.
“Amazon’s 4Q results may spark upside to consensus for a low-double-digit sales gain, aided by a better-than-expected holiday season, strong advertising gains and stabilization in AWS growth rates,” Bloomberg Intelligence said in a note earlier this month.
Amazon’s foray into advertising should lead to continued growth, according to the note. Amazon launched ads for its Prime Video service this past week, which should impact the company’s advertising business significantly in 2024.
“Advertising revenue may continue to grow at a 20% plus clip as Amazon takes market share, given its more than 200 million global prime subscribers,” Bloomberg Intelligence said.
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