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'Winner take most': Here's what Wall Street is expecting from Amazon's Q1 earnings report

Jennifer Sor   

'Winner take most': Here's what Wall Street is expecting from Amazon's Q1 earnings report
  • Amazon is set to report its earnings for the first quarter after the closing bell on Tuesday.
  • Investors have their eye on the company's AI initiatives and profit metrics.

Amazon will report earnings on Tuesday after the closing bell and Wall Street has its eye on a few key details heading into the call.

The company has seen a strong performance so far in 2024, with shares up 20%. Investors are generally feeling bullish on mega-cap tech stocks, with Amazon among the companies at the forefront of the artificial intelligence arms race.

The company is developing custom generative AI chips, which could be a huge catalyst for its stock in the coming years, Needham strategists said in a recent note.

"This is a unique strategic position, and since digital markets have 'winner take most' economics, we are optimistic that AMZN will be one of the 2-3 winners from GenAI," the note said.

Investors are also watching for strength in key areas of the company, including Amazon Web Services and advertising revenue. Those areas could be challenged as consumer spending slows.

Here's what Wall Street expects to see from Amazon's upcoming earnings report:

Bank of America: Top stock drivers in play

BofA expects healthy growth from the online retailer over the last quarter. The bank pointed to Amazon CEO Andy Jassy's letter to shareholders, which suggested positive progress in retail margins, AWS, and ad revenue — all "top stock drivers" for the company, analysts said in a note.

"We expect a 1Q beat, and while 2Q set up has some unusual q/q hurdles, we expect positive 1Q metrics and call commentary to be constructive & consistent with the recent Shareholder Letter ... Given expanding retail margins (robust ad growth with a likely 1Q Prime boost), and expected AWS acceleration, we think the stock is still set up for multiple expansion in 2024," analysts wrote last week.

BofA analysts reiterated their "Buy" rating and $204 price target for the stock, implying a 13% upside from its current levels.

Wells Fargo: Healthy trends for the first quarter

Amazon looks to be on a good trajectory, especially when considering that change to its fee structure for its Fulfillment by Amazon program could drive up to $1.2 billion in incremental operating income compared to the previous quarter, Wells Fargo analysts estimated.

Retail sales are expected to contribute $725 million in incremental operating income for the quarter, while Amazon Web Services is expected to contribute $350 million.

"Believe revenue recognized from enterprise cloud migrations still relatively tepid in 1Q but commitments in place for 2H acceleration. View '24 to be a year of cyclical recovery, while Enterprise AI likely more of a focus in '25/'26," the bank said in a note.

Analysts raised their price target for Amazon stock to $217, implying a 20% upside.

Goldman Sachs: Top eCommerce pick into first quarter

Goldman Sachs said it was "cautious" on eCommerce stocks, due to an array of headwinds building in the sector. But Amazon is its "top pick" for the first quarter, thanks to resilient retail demand and expected growth in AWS and ad revenue, analysts said in a note.

"Our industry work and the third-party data sources we surveyed point to online consumer spending remaining resilient in Q1'24. But we see a wide dispersion of results between companies," the analysts wrote.

The firm maintained its "Buy" rating and $220 price target, implying a 22% upside from the stock's current levels.

Needham: Top 2-3 "winners" of the AI race

Amazon is expected to outperform across multiple profit metrics, Needham analysts predicted, adding that Amazon will be among the top winners of the AI race that's captivated Wall Street.

"We believe that cost cutting, as well as Cloud and Advertising rev growth ... will result in overdelivery of FCF and ROICs, which should lead to a valuation multiple expansion," analysts added.

However, the bank noted that Amazon's business still faces risks, including weak consumer demand and rising competition.

The firm maintained its "buy" rating and $205 price target for Amazon stock, implying a 14% upside from current levels.


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