Amazon is set to release its third quarter earnings results on Thursday after closing bell, and analysts are expecting earnings of 78 cents per share on $32.69 billion in revenue. In last year’s third quarter, the internet giant reported 17 cents per share in earnings on $23.2 billion in revenue.

Shares of Amazon stock have skyrocketed over the last year or so, but they began declining on Tuesday and continued to slide on Wednesday. The stock declined by as much as 1.51% to $822.58. Analysts have been virtually gushing over the company for months now, with many moving their price targets for its stock to $1,000 or even more.

Amazon logo Retail sales

Traffic data points neutral for Amazon

RBC Capital Markets analyst Mark Mahaney said in a note to investors that the main traffic data points for Amazon were neutral to negative. For example, ChannelAdvisor’s same store sales data for Amazon was neutral at a 10% increase during the quarter, which is a decline from the 12% growth observed in the previous quarter. ComScore’s U.S. We traffic trends showed a 2% decline in multi-platform unique visitors to Amazon Sites during the quarter, marking a 3-point deceleration on a comparison that was easier by 2 points.

Mahaney sees gross margin trends as being a key component for the third quarter report. He pegs the fourth quarter gross margin at 36%, an increase of 200 basis points year over year. He also believes that investments continue to weigh on the company’s profitability, so he’s expecting a 2% GAAP operating margin.

He projects $3 billion in Amazon Web Services revenue, marking a 42% year over year increase, and $552 million in GAAP operating profits for the segment. For the North America Retail business, he’s expecting $19 billion in sales, representing a 27% increase from last year, and for International Retail, he’s expecting $10.5 billion in revenue, which is a 28% increase year over year.

He continues to rate Amazon stock at Outperform with a $1,000 price target.

Is Wall Street underestimating Amazon?

MKM Partners analyst Rob Sanderson has a Buy rating and $995 price target on the internet company. He is looking for the results to be in line with consensus to better and predicts that management will guide up, particularly on operating margin. He believes Wall Street is underestimating the lift Amazon’s margins will receive from expanding the contributions of Fulfillment by Amazon.

He believes merchants are being drawn to FBA by the growing adoption of Prime and pegs growth in FBA units at 65% in the third quarter. In a note to investors, he pointed out that the company wasn’t prepared for the surge in demand around the holidays for FBA, so its margin performance took a hit as costs escalated. This year, he doesn’t expect it to happen again because he expects the company to be prepared.

He also thinks consensus for International Retail revenue and margin is too low. He notes that international growth has been breaking out over the last several quarters as Prime adoption picks up outside the U.S. He explained that North America growth has averaged 26% since 2013 as Prime adoption picked up, but international consensus numbers suggest a deceleration back into the mid-teens in the next four quarters.

Sanderson also sees room for the AWS margin to beat consensus as it reached a new high f 29.9% in the last quarter.