Earnings Miss: Amazon.com, Inc. Missed EPS By 18% And Analysts Are Revising Their Forecasts

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Shareholders might have noticed that Amazon.com, Inc. (NASDAQ:AMZN) filed its quarterly result this time last week. The early response was not positive, with shares down 5.2% to US$2,286 in the past week. Revenues were in line with forecasts, at US$75b, although statutory earnings per share came in 18% below what the analysts expected, at US$5.01 per share. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.” data-reactid=”19″>Shareholders might have noticed that Amazon.com, Inc. (NASDAQ:AMZN) filed its quarterly result this time last week. The early response was not positive, with shares down 5.2% to US$2,286 in the past week. Revenues were in line with forecasts, at US$75b, although statutory earnings per share came in 18% below what the analysts expected, at US$5.01 per share. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content=" View our latest analysis for Amazon.com ” data-reactid=”20″>View our latest analysis for Amazon.com

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After the latest results, the 43 analysts covering Amazon.com are now predicting revenues of US$344.7b in 2020. If met, this would reflect a decent 16% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to descend 15% to US$18.19 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$335.9b and earnings per share (EPS) of US$27.79 in 2020. So it’s pretty clear the analysts have mixed opinions on Amazon.com after the latest results; even though they upped their revenue numbers, it came at the cost of a large cut to per-share earnings expectations.

The analysts also upgraded Amazon.com’s price target 7.1% to US$2,639, implying that the higher sales are expected to generate enough value to offset the forecast decline in earnings. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Amazon.com at US$3,000 per share, while the most bearish prices it at US$1,850. As you can see, analysts are not all in agreement on the stock’s future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It’s pretty clear that there is an expectation that Amazon.com’s revenue growth will slow down substantially, with revenues next year expected to grow 16%, compared to a historical growth rate of 24% over the past five years. Compare this to the 109 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 16% per year. Factoring in the forecast slowdown in growth, it looks like Amazon.com is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Amazon.com. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Amazon.com going out to 2024, and you can see them free on our platform here.” data-reactid=”38″>With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have forecasts for Amazon.com going out to 2024, and you can see them free on our platform here.