Amazon.com, Inc. (NASDAQ:AMZN) reports the results from its September quarter tonight after closing bell. The company guided for losses during the quarter, but BGC analyst Colin W. Gillis sees forward looking guidance as being the most important element of Amazon’s results tonight. He continues to rate the online retailer as a Hold but has increased his price target from $245 to $280 per share.

Bezos

Getting impatient waiting for consistency from Amazon

Gillis starts off this week’s report with his characteristic haiku: “The expectations, are building for Amazon, to make a profit.” This seems to suggest that his Hold rating may be due to impatience with Amazon.

The company guided for losses in the September, but consensus suggests that analysts will be looking for consistent profits starting with the December quarter and then running through every quarter of next year. Gillis notes that Amazon.com, Inc. (NASDAQ:AMZN) has many satisfied customers but questions whether customers will be resilient when it’s time to start making “meaningful profits.”

Personally, I wouldn’t be too worried about customer loyalty with Amazon unless the company really starts making drastic changes which customers don’t like. It all depends on just how the company decides to go about becoming more profitable.

Amazon aims to be a “commerce juggernaut”

Gillis suggests that investors might be disappointed if Amazon.com, Inc. (NASDAQ:AMZN) decides to keep investing heavily in its operations, particularly through grocery delivery and logistics as part of its Amazon Fresh program. The retailer has also been rumored to be trying to push into the smartphone market to provide a complementary product to its Kindle.

The analyst emphasizes though, that even though Amazon is angling to become a “commerce juggernaut,” the company’s core has been online retail in the discount sector with zero to little profit.

Problems with Amazon’s business model

Gillis points out that Amazon.com, Inc. (NASDAQ:AMZN)’s revenue per employee has fallen off sharply to $162,000 in the June quarter from $186,000 in the June quarter of last year. Another problem area he sees is shipping losses because of the company’s razor-thin margins. He’s projecting them to be 4.5% of revenue, compared to 4.6% in the June quarter. He thinks the reduction in Amazon Prime shipping benefits will take a small bite out of shipping losses.

Currently he’s estimating September quarter revenue to be $16.76 billion, a 21.4% growth year over year and a 6.7% sequential growth. That’s compared to consensus estimates of $16.7 billion in revenue. He’s projecting a loss of 13 cents per share, compared to a loss of 60 cents per share in the same quarter a year ago and a loss of 2 cents per share in the previous quarter. Consensus estimate projects a loss of 9 cents per share.