Amazon Before Q3 Earnings: Buy the Stock Now or Wait for Results?

Amazon AMZN is scheduled to report third-quarter 2024 results on Oct. 31.For the third quarter, the company expects net sales between $154 billion and $158.5 billion. Net sales are expected to grow 8-11% from the year-ago quarter’s reported figure.The Zacks Consensus Estimate for net sales is pegged at $157 billion, indicating growth of 9.7% from the prior-year quarter’s reported figure.The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.14 per share, which indicates a jump of 34.12% from the year-ago quarter. The figure remained unchanged over the past 30 days.Image Source: Zacks Investment ResearchThe company has been benefiting from dominant position in the e-commerce and cloud markets. It is also riding on strengthening generative AI capabilities.Earnings Surprise HistoryAmazon has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 17.14%. The company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 31.13%.Amazon.com, Inc. Price and EPS Surprise Amazon.com, Inc. price-eps-surprise | Amazon.com, Inc. QuoteEarnings WhispersOur proven model does not conclusively predict 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. This is not the case here. 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 0.00% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Key Factors to Influence Amazon’s Q3 ResultsPrime Ecosystem Leads Multi-Channel ExpansionIn the third 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 emerging presence in the pharmaceutical sector, where its innovative RxPass program offers Prime members a simplified medication delivery service for a flat monthly fee of $5.Physical retail operations are expected to show healthy growth, with consensus estimates projecting physical store sales of $5.15 billion, representing a 4% 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 $38.07 billion, indicating a robust 10.9% 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.These combined initiatives are expected to positively impact subscription revenues, with consensus estimates forecasting subscription service sales of $11.13 billion, indicating 9.4% 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. The cloud segment's growth has been primarily driven by the successful adoption of Amazon Bedrock, marking a significant advancement in generative AI capabilities. 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 $27.5 billion, implying a substantial 19.5% 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.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 continued benefiting its financial performance in the third quarter.Strengthening Alexa features are likely to have aided Amazon in delivering a better user experience, the impacts of which, in turn, are expected to get reflected in the upcoming results.Price Performance & ValuationAmazon’s shares have appreciated 23.6% on a year-to-date basis, outperforming the broader Zacks  Retail-Wholesale sector and the S&P 500 index’s rise of 19% and 21.9%, respectively. Shares of Microsoft MSFT and Alphabet GOOGL have gained 13.9% and 18.3%, respectively.AMZN Outperforms Sector, PeersImage 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 2.86X compared with the Zacks Internet - Commerce industry’s 1.7X and higher than the median of 2.8X, 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 solid growth in third-party sales and physical stores, alongside AWS' estimated 19.5% revenue growth to $27.5 billion, 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. Solid AWS momentum, coupled with a deepening focus on generative AI, is a plus. It is helping Amazon maintain its dominant cloud position. Maintaining a position in Amazon appears prudent at present. Investors looking to buy the stock should, however, wait for a better entry point, as a stretched valuation might be perceived as a risk.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want 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. 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