Rising 18% YTD, What To Expect From Amazon Stock In Q1?

Amazon (NASDAQ: AMZN) is scheduled to report its fiscal Q1 2024 results on Tuesday, April 30, 2024 (after market). We expect Amazon to edge past the consensus estimates of earnings and revenues. The company outperformed the street expectations in the last quarter, with net revenues increasing by 14% to $170 billion. It was driven by a 13% rise in the North America and Amazon web services segments, followed by a 17% gain in the International division. We expect the first quarter result to follow the same trend. Our interactive dashboard analysis on Amazon’s Earnings Preview has more details.

Amid the current financial backdrop, AMZN stock has seen little change, moving slightly from levels of $165 in early January 2021 to around $180 now, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. Overall, the performance of AMZN stock with respect to the index has been quite volatile. Returns for the stock were 2% in 2021, -50% in 2022, and 81% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that AMZN underperformed the S&P in 2021 and 2022. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for other heavyweights in the Consumer Discretionary sector including TSLA, TM, and HD, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could AMZN face a similar situation as it did in 2021 and 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?

Our forecast indicates that Amazon’s valuation is $205 per share, which is 14% above the current market price of around $180. 

(1) Revenues to beat the estimates

Amazon’s revenues grew 12% y-o-y to $574.8 billion in FY2023. 

• All major categories posted growth in the year – online stores (5%), physical stores (6%), third-party seller services (19%), subscription services (14%), advertising services (24%), and AWS (13%). We expect the same trend to continue in Q1. 
• Overall, we forecast Amazon’s revenues to touch $641.4 billion for the full-year 2024.

Trefis estimates Amazon’s fiscal Q1 2024 net revenues to be around $143.6 billion, marginally above the $142.5 billion consensus estimate.

(2) EPS to top the consensus estimates

Amazon Q1 2024 adjusted earnings per share (EPS) is expected to be $0.85 per Trefis analysis, 2% above the consensus estimate of $0.83. The adjusted net income increased from -$2.7 billion to $30.4 billion in FY 2023. It was primarily because of lower operating expenses as a % of revenues, higher revenues, and a significant jump in the total non-operating income from -$18.2 billion to $705 million. Notably, the non-operating income was down in 2022 due to a marketable equity securities valuation loss. Further, the same trend was witnessed in Q4 2023. We expect the Q1 results to be on similar lines. Overall, Amazon is likely to report an annual GAAP EPS of $4.12 and revenue per share (RPS) of $61.48 for the full-year 2024. 

(3) The stock price estimate is 14% higher than the current market price

We arrive at Amazon’s valuation, using an RPS estimate of around $61.48 and a price-to-sales (P/S) multiple of 3.3x in fiscal 2024. This translates into a price of $205, which is 14% above the current market price. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

[1] Returns as of 4/29/2024
[2] Cumulative total returns since the end of 2016

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