Prime Day, which took place on June 21-22, one month earlier than its usual July slot, is expected to boost Amazon’s second-quarter earnings. The company does not release sales figures for the two-day discount event, but analysts believe the results were either in line with their expectations or slightly lower than in previous years.
Even if Prime Day sales increased at a slower rate than last year, most investors expect Amazon to report a strong second quarter. Analysts polled by StreetAccount expect Amazon to earn $115.4 billion in revenue during the third quarter, a 29.8 percent increase year over year.
Investors will also be looking for the following four items in Amazon’s earnings report:
- Caution in Q3
Amazon’s third-quarter outlook will be crucial for investors looking for a post-pandemic slowdown.
There is some concern that as the economy recovers and consumers spend more on travel and services, the pandemic-fueled e-commerce momentum may slow.
However, an increase in highly contagious Covid-19 delta variant cases may prompt consumers to return to online shopping as a precautionary measure, benefiting Amazon and other digital retailers. Analysts have also pointed out that Amazon will benefit from a strong back-to-school shopping season and an expanded child tax credit.
In a note to clients, UBS analysts wrote, “If anything, a slight moderation in growth this quarter will help to recalibrate expectations for the next few periods.” “The important point is that this print will serve as a healthy reminder that AMZN has a dominant position in a long-term trend.”
- A new CEO has been appointed.
On July 5, Amazon executive chairman Jeff Bezos handed over the CEO role to Andy Jassy, in one of the most closely watched executive transitions in recent memory.
Investors will be watching to see if Jassy, who previously led Amazon’s cloud computing division, provides any insight into his long-term strategic plans or top priorities for the company. Jassy could speak directly to investors during Amazon’s quarterly earnings call on Thursday evening. But, if his predecessor’s decisions are any indication, that’s unlikely. Bezos last appeared on an earnings call in April 2009.
- Same-day shipping
On the company’s earnings call last quarter, Amazon’s chief financial officer, Brian Olsavsky, stated that the company was working hard to restore its one-day shipment percentages to pre-pandemic levels.
When the Covid-19 pandemic caused a surge in online ordering, Amazon’s fulfillment and logistics operations were severely disrupted, resulting in longer delivery times and bottlenecks in the company’s warehouses. Amazon, on the other hand, has rapidly expanded its physical footprint in the last year, giving it more capacity to handle orders.
According to Amazon executives, this has resulted in one- and same-day shipping returning to normal levels in some areas.
Amazon announced on May 26 that it would purchase MGM Studios for $8.45 billion. According to reports, the Federal Trade Commission is looking into the acquisition.
Investors will be looking for any comments from Amazon about the regulatory scrutiny, as well as any information about its content plans.
According to the company’s most recent annual report, it spent $11 billion on content for its streaming video and music services last year. If the MGM deal is approved, Amazon’s content budget could grow even more, allowing it to mine the studio’s archives for future spinoffs and remakes.
The Hollywood studio owns a large catalog of titles, including the James Bond franchise and popular TV shows such as “The Handmaid’s Tale” and “Fargo.”
Amazon after earnings
The company will report its second-quarter earnings after the bell on Thursday, capping off a busy week for Big Tech earnings.
The quarter is historic for Amazon because it will be the first report with Andy Jassy fully in charge as CEO instead of Jeff Bezos, who stepped down on July 5. Bezos was appointed executive chairman of the board of directors of the e-commerce behemoth.
“The question on my mind is whether he will follow [Apple CEO] Tim Cook’s lead and participate in the earnings call, or whether he will follow Jeff Bezos’ strategy and leave it to the CFO and the head of investor relations,” said Tom Forte, a research analyst at D.A. Davidson, of Jassy, adding that the company may also highlight Amazon’s benefits for some small businesses as a way to push back against regulatory scrutiny.
As Jassy begins his new role, consider how Amazon’s stock has reacted to previous earnings reports.
How Amazon typically trades following its quarterly earnings report. The results, which span nearly two decades, show that Amazon has had its share of misses, but its stock trades higher the next day on average.
Amazon’s track record in the second quarter is mixed. According to Bespoke, the company has only beaten earnings expectations 53% of the time, and only three of the last five times.
Nonetheless, the e-commerce behemoth’s stock typically trades higher, with a one-day gain of about 1.9 percent on average. This is the second-best performance for post-earnings days, trailing only the nearly 4% move following the first-quarter report.
Amazon’s earnings reports have historically been hit-or-miss, though its bottom-line beats have been strong in recent years. The company has exceeded earnings per share expectations by at least 40% in each of the last four quarters, but its stock has fallen after three of those reports.