360-Degree Earnings Preview For Amazon.com (AMZN)

January 31, 2012 by Jon C. Ogg

Amazon.com, Inc. (NASDAQ: AMZN) may be well down from its highs in 2011, but the online retail platform giant is expected to post its fourth quarter earnings after the close of trading.  This should be the biggest quarter ever for Amazon due to its massive wave of Kindle sales that have been made.

Thomson Reuters has estimates of $0.19 EPS and $18.21 billion.  Keep in mind that this is the “money quarter” because of the holidays.  Amazon offers guidance usually and the estimates for the current quarter ahead ar $0.33 EPS on $13.41 billion in sales.  For all of 2012, the consensus target is $1.83 EPS and $65.42 billion in sales.

The big question we have is ultimately on margins, but we are more focused than just that tease.  The Kindles are reportedly sold at losses or razor-thin margins.  It is a “given the razor free and sell them lots of razor blades” model.  With millions of units now sold, we just have to wait and see what comes from Mr. Bezos.  The other issue is the endless costs of mail and packages. For the die-hard customers, Amazon often loses money on its mailing and UPS rates.

Amazon’s chart is at a critical juncture.  The key 200-day moving is higher at $202.30 while the 50-day moving average is lower at $185.81. With shares close to $192.00 today, the 52-week trading range is $160.59 to $246.71.

Analysts still have average price targets which are higher and the consensus mean target from Thomson Reuters is “Buy” oriented with a $233.90 target.

Options traders appear to be braced for a move of $11 to $12.50 ahead of earnings if you use the monthly options prices in puts and calls rather than the weekly expirations. Frankly, it seems as though the options traders may not be pricing in enough of a move because this quarter has the huge Kindle wild card associated with it.

JON C. OGG