AWS, Buy With Prime And More Key Catalysts For Amazon Investors To Watch Ahead Of Q4 Earnings

Zinger Key Points
  • The new "Buy With Prime" button could add $3.5 billion in revenue by 2025.
  • Reduced funding for startups and internet companies could hurt Amazon Web Services, the company's cloud arm., Inc. AMZN is releasing its fourth-quarter financial report after the close Thursday. Here’s what investors need to know ahead of the print.

The consensus estimate for Amazon’s fourth-quarter revenue is $145 billion, in line with the e-commerce giant’s recent guidance. Amazon said during its third-quarter call in October that it expected fourth-quarter revenue to be between $140 billion and $148 billion, equating to year-over-year growth of between 2% to 8%.

The company made headlines on Tuesday for illegally resisting unionization efforts by its employees, as per a National Labor Relations Board judge.

Markets have been responding positively in anticipation of the call, with the company's stock gaining almost 20% in the last month and 4.6% in the last five days.

Hard Times Ahead For Big Tech?

On Monday, Barclays analyst Ross Sandler cut the price target for Amazon from $140 to $130 and maintained an Overweight rating. 

The e-commerce behemoth is reporting earnings this week alongside several others in the tech sector, including Apple Inc AAPL, Advanced Micro Devices, Inc. AMD and Alphabet Inc GOOG.

Analyst Dan Ives at Wedbush called the sector "under-owned" on the heels of a massive wave of firings that broke through the entire tech space.

Investor worries about a deteriorating enterprise/consumer demand backdrop will continue to haunt tech stocks in 2023, the analyst said.

Is ‘Buy With Prime' Amazon's Secret Weapon?

A game changer for Amazon's future could be the recently-released "Buy with Prime" button, which allows third party e-commerce websites to offer their customers the ability to checkout as if they were on the Amazon site, with one click.

On Tuesday, the company took the option off the invite-only mode and made it widely available to online vendors.

According to analysts at Morgan Stanley, every 2% of adoption is likely to add $1 billion or more on annual pretax earnings by 2025. A bullish view puts $3.5 billion of extra revenue on Amazon's lap.

This new option would allow Amazon to monetize the billions of packages delivered annually beyond its own platform. 

"Buy with Prime volumes should help to drive fulfillment and logistics efficiency," say Morgan Stanley analysts, as Amazon would be able to make better use of its excess capacity in logistics.

Headwind For Amazon Web Services

Analysts at Oppenheimer are less bullish on Amazon. In a Tuesday report, the equity research firm stood by its revenue estimates for Amazon Web Services, which are between 3% to 5% below the consensus on the Street.

The caution is driven by customers transitioning on-demand billing to discounted term contracts, a decrease in usage "as the digital economy reverts somewhat back to in-person" and reduced funding for startups and internet companies following the tech slump of 2022.

The analysts wrote that "despite the near-term headwinds," they "remain very positive on AWS long term."

What Could Go Wrong For Amazon?

Oppenheimer named the biggest risks to its Amazon price target:

  • Further deterioration in the macroeconomic environment, which has been having a huge impact in the global economy since the COVID-19 pandemic.
  • Reduced levels of consumer financing for making bigger purchases, which could come as a consequence of the Fed increasing interest rates.
  • Declines in consumer confidence.
  • Increased competition from brick-and-mortar retailers.
  • Changes in online taxation.

Shutterstock image.

Market News and Data brought to you by Benzinga APIs
Price Target
Posted In: Analyst ColorPrice TargetPreviewsReiterationTop StoriesMarketsAnalyst RatingsTechTrading Idease-commerceExpert Ideasretail
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!