Full Earnings Preview for Amazon.com… Watch Those Margins (AMZN, BBY, RSH, BKS)

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Amazon.com Inc. (NASDAQ: AMZN) is set to report earnings after the close of trading today and investors who like retail and internet stocks will be paying close attention.  The company has expanded into many areas of business so that it can pave its growth path in the future.  The sacrifice is that this kills its margins, and there is always a chance that the company will not be able to focus so many operations.

The real issues is what the future means for the likes of a Best Buy Co. Inc. (NYSE: BBY) and ultimately an even-higher failing model from RadioShack Corporation (NYSE: RSH).  It also may hold part of the future of Barnes & Noble, Inc. (NYSE: BKS) in its hands.  The Outer Limits used to say “We will control all you see and hear.”   Jeff Bezos may have outer space ambitions of his own, but he wants to control at least a piece of all things that you buy online.

Amazon is expected to report earnings of $0.07 EPS and $12.9 billion according to Thomson Reuters.  As far as guidance, the current quarter that has just started is expected to be $0.20 EPS and $12.8 billion in sales. The Thomson Reuters consensus is $1.24 EPS and $62.7 billion in sales.  Keep in mind that the estimates for 2013 are $2.54 EPS and about $80.25 billion comes to an expected 76-times expected 2013 earnings.

The market value here is over $88 billion and the stock has been public since the late-1990s.  The big long game is what investors are betting on here.  The move for specializing in shoes, industrial equipment, buying warehouse robotics, having a sports collectibles dedication, and on and on is just part of the story beyond Kindle and digital media here.  That is why investors are paying up so much for the company’s future earnings.

Wall Street has decided that it just will not punish Amazon for having such low margins.  So here is what the specific expectations and/or statistics are:

  • Analysts have a consensus 12-month price target of over $218 on the stock, an expected 12% premium to today’s price;
  • The stock chart has of late been using its 50-day moving average as support and that figure is $188.50;
  • The stock chart recently failed to break-out above the 200-day moving average and that figure is $200.03 as of today;
  • Using the May monthly speculative call and put options, our read is that options traders are pricing in a move of up to $9.50 or $10.00 in either direction;
  • Shares are up 12% or so year to date and the $194 share price compares to a 52-week trading range of $166.97 to $246.71.