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Amazon.com, Inc. Q3 2017 Earnings Preview: Looking For A Sales Beat

Amazon.com, Inc. (NASDAQ:AMZN) Q3 2017 earnings are set for release on Thursday after closing bell. Wall Street is looking for the online retailer to break even on $41.74 billion in sales. The company guided for $39.25 billion to $41.12 billion in revenue. In last year’s third quarter, Amazon reported earnings of 52 cents per share on $32.71 billion in revenue.

Amazon stock rallied on Tuesday after sliding on Monday, although it hasn’t come close to regaining what it has lost since early Friday.

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Amazon Q3 2017 earnings: worried about “competitive dynamics”?

KeyBanc analyst Edward Yruma is one of the few analysts who don’t rate Amazon stock at Buy or the equivalent as his rating stands at Sector Weight. He likes the online retailer’s long-term growth prospects but is less constructive on its near-term prospects due to “competitive dynamics.” Despite that, he notes that Amazon continues to take share from every other retailer.

He’s looking for the core retail business to grow by about 17%, which is in line with the previous quarter. The analyst notes that Whole Foods is essentially a non-event for the third quarter because it only includes about five weeks of contribution from the grocery store chain. He projects a “significantly faster growth rate” for the company’s third-party and subscription services revenues.

Yruma believes that Amazon Web Services is “transitioning from hypergrowth to high growth” as its growth is set to decelerate for the eighth consecutive quarter. However, he also notes that there aren’t many enterprise franchises that run on a scale of $18 billion with a greater than 40% annual growth rate. KeyBanc’s bull case for Amazon stock is $1,172, while his bear case is at $770.

Amazon stock price target raised

Deutsche Bank analyst Lloyd Walmsley boosted his price target for Amazon stock in his preview note for the company’s third-quarter earnings release. He expects the company’s top-line growth to remain strong, particularly in retail where it continues to focus on expansion.

Not only has Amazon been building more fulfillment centers, including overseas, but it’s also been growing its total addressable markets be adding more categories in various markets. He continues to see Amazon stock as a “core long-term holding” and raised his price target from $1,175 to $1,192 while maintaining his Buy rating.

Walmsley will be looking for more detail on the Whole Foods integration as Amazon has not revealed whether the grocery store chain’s results will be broken out separate from its North America Retail segment. Eventually he expects them to be merged into a single “omnichannel experience” if it doesn’t do so in Thursday’s report. He also hopes to hear more about the online retailer’s plans for Whole Foods beyond listing its private-label products on Amazon. He expects the company to leverage Whole Foods’ store infrastructure as it tries to convince more Prime customers to also order food.

Amazon’s guidance

Wedbush analyst Michael Pachter has one of the more bullish price targets for Amazon stock at $1,250, although not the highest. He notes that the company had a successful Prime Day as it reported a 60% year-over-year increase in sales for the Black Friday-like shopping day. In fact, Amazon said that its July 11 sales exceeded even those of Black Friday and Cyber Monday last year, so Prime Day 2017 was its biggest sales day ever. Pachter pegs Prime Day sales at about $1.6 billion.

He expects Amazon’s fourth-quarter guidance to be in line with his revenue estimate for the quarter, which stands at $59.32 billion, versus the consensus of $58.85 billion. However, he notes that discretionary spending makes it difficult to predict the company’s operating income outlook.

Amazon stock rose by about 1% to $975.96 during regular trading hours on Tuesday.