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Amazon (AMZN) is one of the most important stocks in the market.
Amazon is a so-called Magnificent 7 stock with a giant market capitalization of nearly $2 trillion. At this valuation, AMZN stock has a heavy weighting in most stock indices that sort their holdings by market cap. Thus, even for passive investors, watching Amazon and understanding its quarterly earnings is a good practice.
With that said, Amazon’s upcoming earnings report and conference call, scheduled for Thursday, May 1 at 5 p.m. Eastern, will be important to watch.
Let’s dive into what Wall Street is expecting and where analysts think AMZN stock could be headed over the next year.
Upcoming Earnings Should Be Big
Amazon’s Q1 earnings are expected to provide investors with considerable earnings growth, with the consensus estimate for earnings per share sitting aorund $1.35. This represents year-over-year growth of nearly 20%. Analysts are calling for revenue of $155.1 billion, up 8.2% year-over-year.
The company’s AI integrations and data center businesses are expected to be the key drivers of earnings growth. If earnings meet or beat expectations, the company’s current valuation multiples of around 30 times forward earnings and 3 times sales should improve.
That said, analysts do note that potential pressure on the American consumer could weigh on the company’s core e-commerce business, and cloud growth in certain Asian markets could be hit by President Donald Trump’s ongoing tariff-oriented trade policies. Investors will undoubtedly be on the lookout for any indication that growth could be slowing.
Personally, I think it’s likely that the Street will care much more about Amazon’s forward guidance than its Q1 numbers, which are largely baked into the cake. Given the amount of uncertainty in the market, I do think investors should be braced for some relatively significant volatility in AMZN stock this week.
What Do the Fundamentals Say?
Over the past three quarters, the trend for Amazon has seen strong cash flow growth, and shares now trade at almost exactly 17 times operating cash flow. This leaves Amazon with an operating cash flow yield of roughly 5.9%.
That appears to be a reasonable cash flow yield for Amazon as it continues to find ways to improve its operating efficiency and most investors expect its operating cash flow to keep improving.
What Do Analysts Think?
Despite macroeconomic uncertainty, analysts have a “Strong Buy” rating on shares and a mean 12-month price target of $247.22, which implies upside potential of 33% from here. Even the Street-low target of $195 is above its current trading price.
For now, investors may be best positioned by sitting tight heading into the May 1 print and waiting to see if any commentary arises that shifts their long-term view on the company. In my view, something drastic would be necessary to materially affect the company’s growth trajectory, even with all the uncertainty floating around in the market right now.
