Amazon (AMZN) Q3 earnings preview: Key factors to watch for

Amazon (NASDAQ: AMZN) disappointed the market when it released second-quarter results a few months ago, with a surprise earnings miss that triggered a stock selloff. The market’s views on the September-quarter performance, scheduled to be published Thursday after the market’s close, points to mixed results.

It is estimated that third-quarter earnings dropped 20% year-over-year to $4.60 per share. Meanwhile, revenues are seen growing 22% annually to $68.79 billion.

Amazon has surprised the market quite often by diversifying into non-core areas, ranging from freight transportation to retail pharmacy. The Seattle firm’s recent setback at the stock market was equally unexpected, raising fears that it has entered a phase of slowdown.

Slowdown

Earnings missed the Street view in the June-quarter after beating consistently in the past, denting investors’ confidence. Nevertheless, the long-term outlook points to positive earnings growth in the full fiscal year and beyond.

Related: Shopify could be the next Amazon – here’s why

The retail behemoth continues to rely on Amazon Web Services to maintain the growth momentum. However, the ongoing weakness in the cloud service platform could be a drag on margins in the to-be-reported quarter. Another dampener is the uptick in the costs associated with the one-day shipping service that was launched earlier this year.

Recovery in Cards?

Amazon continues to expand its subscription base, attracting more and more customers to the Prime membership deal, despite competition from the likes of Walmart (WMT). However, it needs to be seen if the upcoming report would bring cheer to investors and shift the stock back to growth mode.

With the holiday season approaching, Amazon is once again busy setting strategies to lure customers to its platform, thereby emerging from the ongoing slump.

In the second quarter, an uptick in North American sales and contributions from the cloud division lifted net sales by 20% to $63.4 billion. Though earnings moved up 3% to $5.22 per share, they missed the estimates. Amazon Web Services registered 37% growth.

Competitors

Walmart is all set to unveil its third-quarter results on November 14, before the opening bell. Target Corp. (TGT) is expected to publish results for its most recent quarter on November 20 before the commencement of regular trading.

Also see: Amazon Q2 2019 Earnings Conference Call Transcript

Amazon shares are still struggling to regain strength after losing steam following the last quarterly report. The stock has gained about 9% since the beginning of the year.

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