RBC Capital Chimes In On Amazon Ahead Of Q4 Earnings

Investors are getting ready for Amazon.com, Inc. AMZN's earnings report for the final quarter of 2014 scheduled for Thursday, January 29 after market close. The company is expected to post earnings of $0.22 per share and $29.7 billion in revenue.

Amazon last announced its quarterly earnings on October 23, posting what was its biggest loss in more than a decade. They reported a per-share loss of 95 cents, widening from a 9-cent loss in the same quarter the year prior. Analysts expected a 74-cent loss. Although Amazon pulled in $20.58 billion in revenue, they also posted a net loss of $437 million. The loss was bigger than expected due to a surge in spending on R&D and product development on items like the Amazon Fire phone, which ended up being a big flop.

The e-commerce giant has failed to beat analyst consensus estimates for the past six quarters, causing some investors to begin to lose hope in the stock. With that said, many are worried that the strengthening U.S. dollar will negatively impact the company’s earnings in the fourth quarter as Amazon has a large international presence.

However, Amazon’s fourth quarter earnings may mark a turnaround for the company as it added over 10 million Prime subscribers over the holiday season. With that said, Investors will be looking for an update on the building of Amazon Prime’s ecosystem.

In addition, Amazon’s AWS is continuing to rapidly gain momentum and becoming a leader in the cloud computing space.

RBC Capital analyst Mark Mahaney weighed in on Amazon on January 27, ahead of its Q4 earnings, maintaining an Outperform rating on the stock with a $410 price target. The analyst reduced his 2015 and 2016 estimates for Amazon by 4 percent due to “increasingly material FX headwinds.” Because of the stronger dollar, Mahaney “now believe[s] that [Amazon] will face 15% Y/Y FX headwinds in the first three quarters of 2015.” With that said, the analyst has “no change to [his] Q4 estimates.” The analyst added, “Based on intra-quarter data points, our channel checks, and our model sensitivity work, we believe Street estimates for the December quarter are reasonable, although deteriorating currency trends are likely to upend Street estimates for the March quarter.”

Mark Mahaney has rated Amazon 28 times since April 2009, earning a 73 percent success rate recommending the company and a +18.6 percent average return per recommendation.

Mahaney is known for rating internet related stocks, such as Netflix NFLX and Google GOOGL, helping him earn an overall success rate of 66 percent recommending stocks and a +23.5 percent average return per recommendation. The analyst has rated Netflix 30 times since June 2009, earning an 84 percent success rate recommending the company and an impressive +65.2 percent average return per recommendation. Likewise, Mahaney has rated Google 32 times since June 29 with a 74 percent success rate recommending the company and a +32.9 percent average return per recommendation.

However, Mahaney has not always been as accurate with his recommendations as he has rated eBay EBAY 12 times since April 2010 with a 29 percent success rate recommending the company and a -4.8 percent average profit loss per recommendation.