Outlook: Amazon.com Still Leading the Pack

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Amazon (NASDAQ:AMZN) will report Q4 results after the close on Thursday, January 30, and host a call to discuss results at 2:00 p.m. PT (webcast: www.amazon.com/ir).

We expect Amazon to report Q4 revenue well above consensus and our estimates as it continues to gain share from brick-and-mortar retailers; however, EPS remains unpredictable as the company’s spending soaks up gross profit dollar growth. Our estimates are for revenue of $25.95 billion and EPS of $0.81 versus consensus of $26.06 billion and $0.66, and guidance for revenue of $23.5-26.5 billion. We modeled operating income of $527 million versus guidance of $(500)-500 million, but our estimate may prove optimistic as Amazon has consistently sacrificed near-term profitability in order to drive long-term growth.

The day after Christmas, Amazon announced its best ever holiday season setting several records. Prime membership was so popular this holiday that the company limited new signups during peak periods to ensure that the surge in new membership did not impact current members’ service.

Earlier this year, Amazon announced a record year for Marketplace Sellers as well. Amazon announced that it will increase many of the Webstore and Fulfillment fees by Amazon this year. We see these fee increases as a signal of Amazon’s confidence in leverage over third parties, and believe the increases are a leading indicator of company’s intent to accelerate profits.

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