Axiom's Anthony Ahead Of Amazon Earnings: 'Set-Up Looks Good Into The Print'

In a report published Thursday, Axiom analyst Victor Anthony maintained a Buy rating on Amazon.com, Inc. AMZN, with a price target of $500. The analyst expects the company to report robust retail and AWS results Thursday evening, while issuing a strong guidance for Q3.

"Sentiment on the shares has improved meaningfully this year on enthusiasm tied to AWS's growth and margin profile, as well as the likelihood for improving operating leverage at retail," Anthony stated, following the shares rising 57 percent year-to-date.

The analyst expects Amazon to report its 2Q15 revenues largely in-line with the consensus, representing 15 percent year-on-year growth, driven by 13 percent year-on-year growth in North America and easier comps in Japan, due to the consumption tax. AWS is expected to post 55 percent year-on-year growth for the quarter.

According to the Axiom report, "FX is unlikely to be a drag on 2Q results vs. guidance given that the Euro and the British Pound rates have increased an average of 3.2 percent and 2.9 percent, respectively since Amazon provided guidance on the 1Q15 call."

ChannelAdvisor growth rates suggest that Amazon's growth remained robust in Q2, although marginally below the Q1 level.

Anthony expects the company to benefit over the next few quarters "from lapping the Japan consumption tax increase and the AWS price cuts, and CSOI margin comps are easier in 3Q due to heavy video content spend and Fire Phone charges in 3Q14."

The analyst also expects the Q3 revenues to benefit from the Prime Day sales, which expected to drive residual sales of non-sale items as well.