Published: Sat, October 27, 2018
Money | By Arnold Ball

Last Minute Thought: Buy or Sell Amazon (AMZN) Stock Before 3Q18 Earnings?

Last Minute Thought: Buy or Sell Amazon (AMZN) Stock Before 3Q18 Earnings?

Jeff Bezos, CEO of Amazon, which disappointed Wall Street Thursday despite posting much better-than-expected third quarter earnings.

There were no ratings downgrades from the Wall Street analysts who have nearly universally backed the companies' long-term prospects, but several said there were signs that both were beginning to face tougher competition from tech peers as well as the retail companies Amazon has bullied in recent years.

Operating income is expected to be between $2.1 billion and $3.6 billion, compared with $2.1 billion in fourth quarter 2017. We know that Amazon has reported $33.7 million net product sales and $22.8 million in net service sales this past quarter for example, but there's no meaningful breakdown of how that's divided in the company.

"Alphabet is the ad revenue king, so any softness makes people nervous", said independent technology analyst Rob Enderle.

Q4 EPS (forecast): The company didn't provide earnings guidance for the holiday period.

Against Amazon's $10bn, Google owner Alphabet alone generated ad revenues of $28.95bn in the third quarter - equivalent to a 20.3% increase from past year.

Shares are up in early trade, at around 3.6%.

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Revenue from Amazon's worldwide business, which brings in 27.5% of total sales, rose 13.4 percent in the third quarter, missing estimates, and decelerating from a 27% year-on-year expansion in the previous quarter.

While Amazon's sales forecast missed estimates, US shoppers are projected to increase their online spending by as much as 22 per cent this holiday season, according to Deloitte Insights. Analysts' projected US$57.1 billion.

Yet again, Amazon's cloud business gave it a big boost.

Global net sales came to $15.55 billion, up 13 percent, with an operating loss of $494 385 million.

On the brighter side was data that showed gross domestic product increased at a 3.5 percent annualized rate in the third quarter as a tariff-related drop in soybean exports was partly offset by the strongest consumer spending in almost four years and a surge in inventory investment. The company continues to increase wallet share with existing cloud customers, and acquisition remains strong evidenced by Amazon's healthy pipeline of new enterprise clients.

And the company continued to see success in advertising. The majority of stocks within the S&P 500 are already either in correction or in bear territory, with the latter representing a decline of more than 20 percent. Its "other" revenue, which largely comprises advertising sales, jumped 122% to $2.5 billion.

Amazon (AMZN): Shares down here, around 7.1%.

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