Amazon (AMZN) recently caught the eye of investors on Zacks.com’s radar, sparking curiosity about the key determinants that could influence its future performance.
Over the past month, shares of this online retail giant have shown an impressive return of +7.8%, outperforming the Zacks S&P 500 composite’s +2.1% change. The Zacks Internet – Commerce industry, to which Amazon belongs, has also made significant strides, gaining 6.3% over the same period.
Amid the flurry of media speculations and trending stock movements, the crux of a company’s trajectory lies in fundamental facts that eventually dictate long-term investment decisions.
Analyzing Earnings Estimates
At Zacks, our primary focus is on scrutinizing a company’s earnings projections to gauge its fair stock value, aligning with our belief that stock valuation is anchored in future earnings potential.
The direction of a stock’s price is highly influenced by how analysts revise their earnings estimates in response to prevailing business trends. When earnings estimates surge, so does the stock’s fair value, piquing investor interest and driving the stock price upwards. Historical data strongly attests to the alignment between earnings estimate revisions and short-term stock price movements.
Notably, Amazon is anticipated to post earnings of $1.14 per share for the current quarter, depicting a robust change of +34.1% from the previous year. The Zacks Consensus Estimate for the current fiscal year stands at $4.74 per share, reflecting a substantial year-over-year increase of +63.5%.
Looking ahead to the next fiscal year, the estimated earnings of $5.84 per share indicate a promising change of +23.2% from the prior year. These figures, coupled with the Zacks Rank #3 (Hold) based on our comprehensive stock rating tool, underscore Amazon’s potential trajectory.
Insights into Revenue Growth Forecast
While earnings growth serves as a robust indicator of financial well-being, sustainable revenue escalation is equally vital for a company’s longevity. A company’s ability to nurture revenue growth is fundamental to fostering earnings growth over extended periods.
For Amazon, the consensus sales estimate for the current quarter suggests a year-over-year growth of +9.8%, with projected revenue figures of $634.49 billion and $702.77 billion for the current and next fiscal years, respectively, reflecting encouraging growth trajectories.
Recent Performance and Surprise History
In the most recent quarter, Amazon reported revenues of $147.98 billion, marking a notable year-over-year rise of +10.1%. The corresponding earnings per share (EPS) of $1.23 for this period exceeded the previous year’s $0.63.
Although the reported revenue figures slightly missed the Zacks Consensus Estimate, the EPS performance exceeded expectations, demonstrating Amazon’s consistent ability to outperform market projections.
With a track record of surpassing consensus EPS estimates in the past four consecutive quarters and exceeding revenue estimates thrice, Amazon showcases resilience and growth potential.
Delving into Valuation Metrics
Any prudent investor considers a stock’s valuation before making investment decisions. By comparing a company’s valuation multiples like price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) relative to historical data and industry peers, one can ascertain its true value and growth prospects.
Amazon, with a Zacks Value Style Score of B, indicates that it is attractively priced compared to its counterparts, hinting at potential investment opportunities for value-conscious investors.
Summing Up
The comprehensive analysis presented here, along with additional insights on Zacks.com, provides a holistic view of Amazon’s performance. While the Zacks Rank #3 suggests a market-aligned performance in the near term, the stock’s growth trajectory remains promising based on robust fundamental metrics.
The landscape of investment opportunities evolves, and understanding the intricacies of a company’s financial health is paramount for informed decision-making in the dynamic realm of stock investing.