If Amazon’s earnings take a hit, stocks and ETFs could see a boost too

Amazon (NASDAQ:AMZN) is set to report financial results on Aug. 1. Analysts are expecting it to report revenue of $148.6 billion and earnings per share of $1.02. The consensus estimate also includes operating income of $13.7 billion and adjusted EBITDA of $32.1 billion for the Seattle-based company. The AWS segment is forecast to generate $25.9 billion in revenue (+17.2% y/y) on its own, while the advertising services segment is expected to generate $13.0 billion (+21.1% y/y).

During the earnings conference call, investors can look for details on the expected impact of Prime Day on the financial position of companies that will be included in Q3 results.

Morgan Stanley believes Amazon (AMZN) needs to see its AWS business grow by at least 18% to show some momentum and build credibility with investors, valuing AWS’s positioning in the generative AI space and its ability to generate teen growth during a period of heavy capex.

Bank of America had expected Amazon (AMZN) to beat earnings expectations, with the new 3P fee and Prime Ad ramp seen as margin-boosting factors. The company warned that the biggest risks to margin projections are higher shipping costs and the propensity to start up new fulfillment capacity in the third quarter before the holidays. As for valuation, analyst Justin Post and his team believe that Amazon’s (AMZN) 30.7X 2025 GAAP EPS multiple is reasonable, given expectations for a 27% two-year GAAP earnings CAGR.

Ahead of Amazon’s (AMZN) earnings day, Wedbush Securities said it’s focused on the retail segment’s performance and continued market share gains. Analyst Dan Ives also expects rising operating margins, supported by a shift in the mix toward higher-margin revenues, as well as accelerating growth in AWS and emerging AI monetization. Showing confidence ahead of the report, Wedbush maintained its prior estimate and $225 price target for Amazon with an Outperform rating.

Jefferies remains bullish on Amazon (AMZN) on the earnings report. Analyst Brent Thill kept an eye on the EBIT line. “Consensus suggests a 14% beat to the midpoint of the EBIT benchmark, which is well below the 74% average since 4Q20 and matches the lowest beat in 3Q21, aside from a single 18% miss in 1Q22,” Thrill noted. Thrill reminded investors that Amazon (AMZN) is typically cautious on its EBIT guidance. “A positive mix from faster-growing, higher-margin AWS and Advertising, along with continued gains in e-commerce fulfillment optimization, should allow AMZN to expand collections mode,” he emphasized.

Of course, Amazon ( AMZN ) is one of the most beloved megacap stocks listed on the U.S. market, with 59 of the 61 companies covering the company rating it Buy-equivalent or higher. Amazon ( AMZN ) has also topped EPS estimates for five straight quarters, beating consensus estimates by an average of 35%. Amazon ( AMZN ) has also topped revenue estimates for five straight quarters, beating consensus estimates by an average of 2.2%. Options trading is pushing the stock up 7% after Amazon ( AMZN ) reported earnings. The e-commerce stock gained 2.3% after its Q1 report.

Dividend Sensei analyst Seeking Alpha shared three reasons to buy Amazon (AMZN) ahead of its earnings call, and Oliver Rodzianko delved into the long-term benefits of Amazon’s (AMZN) growing automation.

Retail and Technology Watch

Amazon (AMZN) is casting a large shadow over the retail sector. The stocks that are most correlated with Amazon (AMZN) in the week following its earnings report are Costco (COST), Walmart (WMT), MercadoLibre (MELI), Maplebear (CART), and Wayfair (W). It’s worth noting that Target (TGT) and Dollar General (DG) have a negative trading correlation with Amazon (AMZN) immediately following its earnings report. Another key stock to watch is Rivian Automotive (RIVN), in which Amazon (AMZN) has a 17% stake. Interestingly, Amazon (AMZN) currently has 15,000 electric delivery vehicles on the road and plans to reach 100,000 vehicles by 2030. Since Amazon’s (AMZN) last earnings report, Rivian (RIVN) has announced a massive partnership with Volkswagen (OTCPK:VLKAF). In the technology sector, Meta Platforms (META) has trailed Amazon (AMZN) on its earnings report 78% of the time over the past five years, while Netflix (NFLX) has followed it 66% of the time.

ETF Watch

ETFs with a large share of Amazon (AMZN) include: Direxion Daily AMZN Bull 2X Shares (AMZU), Vanguard Consumer Discretionary Index Fund (VCR), ProShares Online Retail (ONLN), First Trust Dow Jones Internet Index Fund (FDN), Consumer Discretionary Select Sector SPDR Fund (XLY), Fidelity MSCI Consumer Discretionary Index (FDIS), VanEck Retail (RTH), iShares US Consumer Discretionary (IYC), and The Nightview ETF (NITE).