3 Reasons That Make Amazon Stock a Must-Buy Ahead of Q4 Earnings

Amazon AMZN is scheduled to report fourth-quarter 2024 results on Feb. 6.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.For the fourth quarter, the company expects net sales between $181.5 billion and $188.5 billion. Net sales are expected to grow 7-11% from the year-ago quarter’s reported figure. This guidance anticipates an unfavorable impact of approximately 10 basis points from foreign exchange rates.The Zacks Consensus Estimate for net sales is pegged at $187.28 billion, indicating growth of 10.19% from the prior-year quarter’s reported figure.The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.52 per share, which indicates a jump of 50.5% from the year-ago quarter. The figure has moved north by 1.3% over the past 30 days.Image Source: Zacks Investment ResearchThe company has been benefiting from its dominant position in the e-commerce and cloud markets. It is also riding on strengthening generative AI capabilities.AMZN’s Earnings Surprise HistoryAmazon has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 25.44%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 25.85%.Amazon.com, Inc. Price and EPS Surprise Amazon.com, Inc. price-eps-surprise | Amazon.com, Inc. QuoteEarnings WhispersOur proven model predicts an earnings beat for Amazon this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.AMZN has an Earnings ESP of +4.78% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Key Factors to Drive Amazon’s Q4 ResultsPrime Ecosystem Leads Multi-Channel ExpansionIn the fourth quarter, Amazon's growth trajectory is expected to have been anchored by its comprehensive Prime ecosystem, which continues to evolve across multiple revenue streams. The e-commerce giant's robust delivery infrastructure, particularly its Prime Free One Day and Prime Free Same-Day Delivery services, remains a cornerstone of its retail dominance, setting new standards for consumer convenience.The company's strategic expansion in the grocery sector, coupled with its strengthening distribution network, has positioned it favorably in the competitive retail landscape. This growth is further amplified by Amazon's global e-commerce operations and the international expansion of Prime membership benefits. A notable development is the company's Buy with Prime facility, which is available on Belkin.com, offering U.S. Prime members fast, free delivery, easy returns and seamless checkout. Physical retail operations are expected to show healthy growth, with consensus estimates projecting physical store sales of $5.43 billion, representing a 5.5% year-over-year increase. The integration of advanced technology, such as the Amazon Dash Cart, into its brick-and-mortar locations demonstrates the company's commitment to enhancing in-store shopping experiences. Additionally, the expansion of Amazon Fresh grocery stores, Whole Foods locations and Amazon Go outlets continues to strengthen the company's omnichannel presence.Third-party seller partnerships remain a significant growth driver, with consensus estimates for sales pegged at $45.67 billion, indicating a 4.9% increase from the previous year. The streaming segment, led by Prime Video, continues to gain momentum through expanded original content offerings and portfolio diversification. The addition of ad-free Amazon Music as part of Prime membership further enhances the subscription's value proposition.Amazon announced the exclusive premier launch of a true crime documentary, ChiefsAholic: A Wolf in Chief’s Clothing, on Prime Video on Dec. 24 in more than 240 countries and territories globally. These combined initiatives are expected to positively impact subscription revenues, with the consensus estimate forecasting subscription service sales of $12.15 billion, indicating 15.9% growth compared to the previous year. This comprehensive ecosystem approach, integrating retail, healthcare, entertainment, and digital services under the Prime umbrella, appears to be effectively driving Amazon's continued market expansion and revenue growth.AWS Boosts AI Innovation and Infrastructure ExpansionAmazon Web Services (“AWS”) has been strengthening its market position through strategic investments in generative AI and infrastructure expansion. In the quarter under review, BBVA partnered with AWS to migrate its global data platform, ADA, to the cloud. A notable development is that AWS Marketplace now includes Colombian vendors, enabling them to sell software and data globally. With more than 20,000 listings, vendors can offer SaaS, Containers and AMIs with flexible pricing. AWS announced a $1 billion six-year partnership with e& to provide cloud solutions that meet industry regulations that abide by and provide secure and scalable infrastructure.The cloud segment's growth has been driven by the successful adoption of Amazon Bedrock, marking a significant advancement in generative AI capabilities. In the quarter under review, Lee Enterprises LEE chose AWS as its Preferred Cloud Provider to modernize its cloud infrastructure and develop generative AI platforms. Using Amazon Bedrock, Redshift and Nova models, Lee will deliver personalized news, improve advertising and gain data insights.The expansion of AWS' global footprint through additional regions and availability zones enhances its service accessibility and reliability. These strategic initiatives are reflected in the Zacks Consensus Estimate for AWS sales of $28.33 billion, implying a substantial 17.1% year-over-year increase. The combination of cutting-edge AI technology and robust cloud infrastructure positioned AWS as a key driver of Amazon's overall growth momentum in the quarter under review. AWS announced a partnership with Lumen Technologies LUMN to strengthen the connectivity of data centers and optimize cloud network delivery for U.S. customers. AWS also partnered with Box BOX to empower businesses in order to build applications and enhance productivity by integrating GenAI.Smart Device Portfolio Worth ConsideringAmazon’s robust Fire products family, portfolio of Echo smart speakers, Blink smart security cameras and doorbells, and eero WiFi systems are expected to have benefited its financial performance in the fourth quarter.Strengthening Alexa features are likely to have aided Amazon in delivering a better user experience, the impact of which is expected to be reflected in the upcoming results.Price Performance & ValuationShares of Amazon have risen 40.3% in the past year, outperforming the broader Zacks  Retail-Wholesale sector and the S&P 500 index’s appreciation of 31.8% and 22.9%, respectively.AMZN Outperforms SectorImage Source: Zacks Investment ResearchNow, let’s look at the value Amazon offers investors at current levels. AMZN is trading at a premium with a forward 12-month P/S of 3.5X compared with the Zacks Internet - Commerce industry’s 1.92X and higher than the median of 2.85X, reflecting a stretched valuation.AMZN’s P/S F12M Ratio Depicts Stretched ValuationImage Source: Zacks Investment ResearchInvestment ThesisAmazon presents a compelling investment thesis driven by dual growth engines. The core retail business demonstrates strong momentum through Prime ecosystem expansion, enhanced delivery capabilities and omnichannel optimization, while AWS maintains its cloud leadership through strategic AI integration and infrastructure scaling. The company's revenue diversification across e-commerce, cloud computing, digital streaming and healthcare services provides multiple growth vectors. With retail projecting steady growth in third-party sales and physical stores, alongside AWS' estimated 17.1% revenue growth, Amazon appears well-positioned to deliver sustained financial performance. The integration of generative AI across segments further strengthens its competitive moat and long-term growth potential.Final ThoughtsAmazon’s near and long-term prospects are expected to benefit from strong retail strategies, which include bolstering its online and offline retail presence, distribution channels and delivery services. An expanding global presence and the growing adoption of Prime are other tailwinds. The growing footprint in the video streaming space with Prime Video is another positive. Amazon's strategic positioning in the enterprise AI market through Amazon Bedrock represents a compelling investment opportunity for 2025. Solid AWS momentum, coupled with a deepening focus on generative AI, is a plus. With enterprise AI adoption accelerating and Amazon's clear competitive advantages in this space, the stock appears well-positioned for appreciation in the coming year. For investors seeking exposure to the rapidly growing enterprise AI market, AMZN stock offers a combination of established market leadership and significant growth potential.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Lee Enterprises, Incorporated (LEE): Free Stock Analysis Report Box, Inc. (BOX): Free Stock Analysis Report Lumen Technologies, Inc. (LUMN): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks