Analysts at Stifel believed that investors of, Inc. (NASDAQ:AMZN) will focus their attention on the gross margins in advertising, AWS, and 3P businesses as well as the international operating leverage of the e-commerce giant in its third quarter earnings results.


Amazon performance

Stifel analysts Jordan Rohan and Michael Purcell noted that, Inc. (NASDAQ:AMZN) shares slightly beat performance of the S&P 500 (INDEXSP:.INX) (+21% YTD vs. the S&P at 17%) despite reporting consecutive quarters that were in line with consensus estimates.

The analysts said investors want to know if, Inc. (NASDAQ:AMZN) was able to maintain its gross margin expansion, and if it has started to benefit from its improved international efficiency, particularly from its additional fulfillment centers in Europe. During the previous quarter, the e-commerce giant experienced its first increase in international operating margin and profits excluding the impact of foreign currency exchange.

Foreign currency exchange might cause trouble

Rohan and Purcell projected that, Inc. (NASDAQ:AMZN) will report a slight tailwind from foreign currency exchange as the Euro strengthened by an average of 6% y/y. However, they emphasized it was partially offset by the weakening of most currencies in emerging markets including Japan, where the company has strong operations.

The analysts estimate that, Inc. (NASDAQ:AMZN) will be able to deliver $27 billion in GMV with 17% GP/GMV in the third quarter. Their estimate is 25% above the figure recorded in the same period last year as the company demonstrates better monetization from third-party platforms. The company’s AWS and advertising businesses are rapidly growing with high margins.

Rohan and Purcell said their revenue estimate for the e-commerce giant is at the high-end of its guidance and in line with consensus. Their PF operating income estimate of $285 is slightly higher than the guidance, but a bit lower than consensus.

Kindle hardware sales

The analysts adjusted their 4Q estimates for the company to represent the potential increased cost on Kindle Hardware sales. Rohan and Purcell increased their COGS by $393 million, which results in a $404 million decline in PF operating income. They projected the company’s PF EPS at $0.60 from $1.17. They maintained their revenue estimate for, Inc. (NASDAQ:AMZN) at $24.8 billion (+17% y/y fx-adj).

Rohan and Purcell offered a Buy rating with $335 price target for the stock.