Q3 Preview: Amazon (AMZN) Won't Be on 'Fire', But Should Beat Expectations

Amazon.com Inc. (Nasdaq: AMZN) shares are underperforming the broader markets Tuesday ahead of its scheduled third-quarter earnings report.

Expected out after the market close this afternoon, the Street expects Amazon to report earnings of 24 cents per share on revenue of $10.93 billion. Earnings would be a 41.5 percent sequential decline, and 53 percent dip from the same period last year. Amazon has missed estimates by an average of 2.2 percent over the last four quarters, which is inclusive of a 28 percent miss in the first quarter. Exclude that and Amazon has beat views by 7 percent.

Amazon stock gained 5.7 percent through the quarter and is up 7.2 percent since. Shares are 29 percent better on the year. Amazon has traded within a range of $156.77 to $246.71 over the last 52-week time frame.

Amazon currently trades for 13.9x next year's expected earnings, compared with 14.1x for eBay (Nasdaq: EBAY) and 33.0x for Barnes & Noble (NYSE: BKS).

Data from Bloomberg has 21 analysts at Buy on Amazon, 12 with a Hold, and one at Sell. The price target average is $251, with a low of $175 and high of $290.

Analyst Comments

• JPMorgan sees earnings of 17 cents per share on revenue of $10.98 billion in revs. JPMorgan expects solid third-quarter numbers led by impressive top-line performance, though margins are still expected to be low.
  
  While the Street has given Amazon a pass on lowering margin outlooks, as top-line numbers continued to grow, JPMorgan believes the newly introduced Kindle Fire tablet could add pressure to Amazon margins, and pushing expectations even lower. The firm notes "Amazon usually doesn’t show 3Q-4Q leverage." The firm is modeling 5 million Kindle Fire units to be sold in the fourth quarter.
  
  
• Benchmark is modeling for earnings of 24 per share and revenue of $11.3 billion. The firm comments, "anticipating further strength in the EGM (electronics) segment, despite increasingly difficult comparisons in North America, and slight sequential acceleration in Media segment growth."
  
  Benchmark is bullish on U.S. sales, saying, "retail sales in 3Q11 showed a strong 8% y/y growth rate, while domestic ecommerce spending grew 13% y/y, including 16% y/y growth in September. Categories key to Amazon that could sustain double-digit y/y growth include Consumer Electronics, Apparel & Accessories and Books & Magazines."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Amazon's past performance at Streetinsider's Amazon Income Statement.

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