Amazon.com Earnings Preview: Weak Guidance Likely to Pressure Shares Further

Amazon.com (AMZN) is scheduled to report Q208 results after the market closes on July 23. Based on our analysis, we at eChristianInvesting are expecting AMZN to report better than expected results that beat Wall Street’s consensus expectations.

Analyst Expectations

We are forecasting revenues of $4.0B versus analyst consensus of $3.96B. This would represent a 39% increase in revenues from last year’s $2.89B in the same period.

The second quarter is generally Amazon’s smallest of the year – last year accounting for only 19.5% of full year revenues. However, strong traffic growth and increased promotional offers (Free Super Saver Shipping and Amazon Prime) are expected to drive strong top line growth.

Share Performance

To date, Amazon’s shares have dropped over 26%. Meanwhile, the NASDAQ has only fallen 14%. So investors are clearly not very optimistic about Amazon’s ability to continue their strong performance in a declining economic environment.

Valuation

Shares are now trading at 33x consensus 2009 EPS estimates. This represents a premium to their peer group. Despite possible upside potential for the quarter, we expect the company to offer weak guidance numbers which will push shares down further in the coming days. Therefore, we do not recommend holding Amazon shares until they reach a more compelling valuation point.

Disclosure: At the time this article was published, the author did not have a financial position in any of the stocks mentioned.