Amazon (AMZN) has recently been on Zacks.com’s list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock’s performance in the near future.
Over the past month, shares of this online retailer have returned +11.1%, compared to the Zacks S&P 500 composite’s +0.4% change. During this period, the Zacks Internet – Commerce industry, which Amazon falls in, has lost 1.3%. The key question now is: What could be the stock’s future direction?
Although media reports or rumors about a significant change in a company’s business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.
Earnings Estimate Revisions
Here at Zacks, we prioritize appraising the change in the projection of a company’s future earnings over anything else. That’s because we believe the present value of its future stream of earnings is what determines the fair value for its stock.
We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors’ interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
Amazon is expected to post earnings of $1.30 per share for the current quarter, representing a year-over-year change of +5.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -5.4%.
For the current fiscal year, the consensus earnings estimate of $6.08 points to a change of +10% from the prior year. Over the last 30 days, this estimate has changed -2.5%.
For the next fiscal year, the consensus earnings estimate of $6.95 indicates a change of +14.4% from what Amazon is expected to report a year ago. Over the past month, the estimate has changed -5.9%.
With an impressive externally audited track record, our proprietary stock rating tool — the Zacks Rank — is a more conclusive indicator of a stock’s near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #3 (Hold) for Amazon.
The chart below shows the evolution of the company’s forward 12-month consensus EPS estimate:
12 Month EPS
Projected Revenue Growth
Even though a company’s earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It’s almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company’s potential revenue growth is crucial.
For Amazon, the consensus sales estimate for the current quarter of $161.62 billion indicates a year-over-year change of +9.2%. For the current and next fiscal years, $692.27 billion and $761.17 billion estimates indicate +8.5% and +10% changes, respectively.
Newegg Commerce, Inc., a stalwart in the realm of computer and technology products, is set to shake the digital world with its upcoming extravaganza - the FantasTech II Sale. Scheduled to run from October 7 to October 11, this mega event is poised to deliver a cornucopia of discounts on a vast array of tech merchandise. From cutting-edge laptops to gaming essentials, computer components, and smart home gadgets, all the way to the meticulously crafted ABS Gaming Desktops, Newegg aims to captivate both discerning tech lovers and casual shoppers. Brace yourself for what promises to be a tsunami of deals, unmatched in scale and fervor.
A Juicy Teaser from Jim Tseng"We're thrilled to begin our fourth quarter with a bang, and what a bang it shall be," enthused Jim Tseng, the VP of Product Management at Newegg. Reflecting on the previous success of the FantasTech Sale, which spanned over 50 categories, Tseng hinted at a replication of that blissful shopping experience. No need to hold your breath till the holidays; Newegg is here to cater to your needs now and in the most spectacular fashion.
"But wait, there's more," Tseng interjected. The extended returns policy encompassing the holiday season and the collaboration with Affirm for added savings make this the opportune moment to indulge in your PC cravings.
Unlocking Key Details of the SaleSale Dates: October 7 – October 11
Product Categories: From laptops to desktops, graphics cards, gaming peripherals, processors, motherboards, monitors, storage devices, software, smart home accessories, and even furniture and home audio, the FantasTech II Sale casts a wide net.
Highlighted Deals:
ABS Cyclone Aqua Gaming PC-i7-14700KF, RTX 4070 Super, 32GB DDR5 for $1129.99
ABS Cyclone Aqua Gaming PC: i5-13400F, RTX 4060 32GB DDR4, 1TB SSD for $829.99
ABS Cyclone Aqua Gaming PC: i7-14700F, RTX 4060 Ti, 32GB DDR5, 1TB SSD for $1179.99
AOSTIRMOTOR A20 500W Folding Electric Bike for $437.00
Exciting Deals on Tech Products! Tech Bonanza: Unveiling the Latest Deals!Last Reported Results and Surprise History
Amazon reported revenues of $155.67 billion in the last reported quarter, representing a year-over-year change of +8.6%. EPS of $1.59 for the same period compares with $1.13 a year ago.
Compared to the Zacks Consensus Estimate of $154.56 billion, the reported revenues represent a surprise of +0.72%. The EPS surprise was +17.78%.
The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates three times over this period.
Valuation
Without considering a stock’s valuation, no investment decision can be efficient. In predicting a stock’s future price performance, it’s crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company’s growth prospects.
Comparing the current value of a company’s valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.
The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.
Amazon is graded D on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.
Conclusion
The facts discussed here and much other information on Zacks.com might help determine whether or not it’s worthwhile paying attention to the market buzz about Amazon. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.
Only $1 to See All Zacks’ Buys and Sells
We’re not kidding.
Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.
Thousands have taken advantage of this opportunity. Thousands did not – they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
