Amazon Likely To Post Slower Cloud Growth And Margin Loss From Retail Business Slowdown, Analyst Says Ahead Of Q4

Raymond James analyst Aaron Kessler maintained Outperform on Amazon.Com Inc AMZN ahead of Q4 results.
The analyst expects solid long-term eCommerce growth for Amazon, continued leadership in cloud and AWS with some NT risk to Street revenue estimates, high-margin advertising growth, and improving margins for core Retail.
Kessler expects Q4 muted retail growth given tough comps, macro slowdown (particularly in Europe), and FX headwinds.
Given the high margins inherent in its advertising business, slowing top-line growth for Retail implies significant losses.
On the Q3 call, management noted slowing AWS growth as customers looked to tighten costs and specific industries' pulled back.
Additionally, Microsoft Corp's MSFT December quarter Azure Cloud growth indicated a slowdown. MSFT also guided Azure for the March quarter to a slowdown.
Analyst's checks pointed to continued ad momentum for Amazon in Q4.
Kessler believes workforce reductions could result in $4B plus reduced annualized operating expenses for Amazon.
The analyst sought more color around 2022 CapEx plans and expected continued fulfillment and transportation buildout moderation.
Kessler believes growth rates for AWS and potential margin improvements for Retail in 2023 will be the key focus for investors in the quarter.
The analyst estimates total sales of $147B, above the consensus of $145.6B and guidance of $140-148B.
Price Action: AMZN shares traded lower by 1.86% at $94.56 on the last check Wednesday.

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