Wedbush Sees Amazon Reporting Share Gains In Q4 That Were Likely Offset By Record Spending

Michael Pachter of Wedbush on Sunday commented in a note that

fourth quarter report on Thursday will show that the company likely gained share from both online and brick-and-mortar retailers throughout the Holiday season along with launches during the quarter which consisted of the Fire TV stick, Marketplace for service providers and the new Fire phone. Pachter estimates Amazon will earn $0.24 per share in the quarter (versus the consensus estimate of $0.17) on revenue of $30.2 billion (versus the consensus estimate of $29.7 billion). The analyst adds that his $200 million operating income estimate may ultimately prove to be optimistic as Amazon continues to spend on Prime member enhancements and marketing its new product launches. Amazon continues to spend on content for its Studios division while its new private label

appears to have had a relatively slow and weak start, according to Pachter. Also, Amazon opened its eighth fulfillment center during the quarter and began offering free two-hour delivery services in Manhattan to Prime members. Amazon also launched new services within its AWS business and that recent channel checks conducted by Pachter suggest that many companies have transferred to AWS cloud services for their database and other needs. Bottom line, Pachter argues: “While recent announcements have given us increased visibility into Amazon's revenue growth, we are not convinced that the company will share sufficient details about future spending to allow us to accurately model profit growth, and it may take time before earnings per share growths sufficiently to justify its share price.” Shares are Neutral rated with a $330 price target.