Earnings Preview: Amazon

 | Jan 30, 2014 | 10:30 AM EST
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Amazon (AMZN) is scheduled to report its fourth quarter on Thursday after the close. From all indications, Amazon should be able to exceed the top end of expectations, but I'm not entirely certain. Analysts expect revenue of $26 billion and $0.69 per share in earnings. For the full year, Amazon should report $74.9 billion in revenue.

On Dec. 26, Amazon said prime shipments posted a "record-setting holiday season," with 36.8 million items ordered on Cyber Monday. If you recall, there were so many packages in the system, UPS (UPS) and FedEx (FDX) were choking on Christmas presents. Americans complained loudly when their shake weights, fruitcakes and Christmas sweaters were stuck in transit. That news turned around investor sentiment on the company, since Amazon missed analyst expectations the last three quarters in a row.

Despite the investor excitement over the package jam, ComScore said its Market Tracker service projected online sales would disappoint. Specifically, ComScore said U.S. online retail sales rose just 10% to $46.5 billion from Nov. 1 through Dec. 31. ComScore had previously forecasted a 14% rise in online sales. The company blamed the poor economy and the fact that Thanksgiving Day fell one week later in 2013 than in 2012. The investment community seems convinced that Amazon will have a blow out quarter.

In the last five years, Amazon's shares have risen more than 570%. Revenue has gone from $24 billion in fiscal 2009 to an estimated $91.6 billion in 2014. If Amazon can get to the 2014 Street estimate, that's a consolidated annualized growth rate of just over 30%. As long as Amazon can deliver that kind of revenue growth, there is little to stop the stock from going higher. Profits are microscopic, the balance sheet is a disaster and there are heated disagreements about cash flow and valuation. But right now, all that doesn't matter.

With the stock up almost 30% in the last six months, I'd say the "record-setting holiday season" is already baked into the share price. For Amazon to continue its march higher, the company will have to substantially exceed the high end of the revenue estimate. But to me, that doesn't seem likely.

Longer-term, there doesn't seem to be any barriers to Amazon's continued growth. I'm not a technician, but it seems Amazon's stock has churned around in a tight range since early December. I bet you can buy it lower in a few months.

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