Amazon's Mixed Q1 Results and Q2 Guidance: What Wall Street's Saying

Amazon's solid revenue beat was overshadowed by its earnings miss due to its aggressive spending plans.
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Amazon  (AMZN) - Get Report shares were dropping Friday following the company's first quarter earnings release after the closing bell Thursday.

Amazon reported first quarter earnings of $5.01 per share on revenue of $75.5 billion, a 26% increase from the previous year. Analysts were expecting the company to report earnings of $6.25 per share on revenue of $73.61 billion. The company also said it would be spending all of its expected $4 billion in operating profit in the second quarter on coronavirus-related expenses. Shares were falling 5.6% to $2,331.34 on Friday morning.

Here's what analysts covering the company had to say about the quarter. 

Barclays (Overweight, $2,500 PT unchanged)

AMZN is one of the few names accelerating in the current environment, and the only one in mega-cap technology. We think Amazon is well equipped to drive unit efficiency improvements in 2H20 which, combined with significantly more volume should make for a pretty solid trajectory heading into 2021.

-Ross Sandler

Jefferies (Buy, $2,800 PT unchanged)

We see AMZN benefiting from COVID in the near and long-term, as the pandemic accelerates a broader shift from offline to online, particularly in nascent categories like groceries. We believe Q2 top-line guidance could prove conservative, given it implies minimal sequential acceleration despite Q1 benefiting from COVID for less than one month.

-Brent Thill

Credit Suisse (Outperform, PT Lowered from $2,800 to $2,760)

The risks to our price target include higher-than-expected capital intensity for e-commerce or AWS as well as prolonged COVID-19 impact.

We maintain our Outperform rating on the following points: 1) continued e-commerce segment operating margin expansion as Amazon grows into its larger infrastructure, 2) optionality for faster-than-expected FCF growth vis-à-vis its advertising segment, 3) upward bias to AWS revenue forecasts.

-Stephen Ju

Cowen (Outperform, $2,700 PT unchanged)

Amazon has several drivers that should yield robust global revenue growth with rising margins the next several years, namely (i) further B2C eCommerce market share gains in large retail verticals; (ii) emerging eCommerce verticals like B2B; (iii) significant opportunity in existing and newer Int’l markets like India, Mexico, and Australia; (iv) AWS should enjoy years of secular tailwinds.

-John Blackledge

J.P.Morgan (Overweight, PT raised from $2,525 to $3,000)

US e-commerce represents ~15% of adjusted retail sales, and we estimate ~15% of workloads are in the cloud today. We believe Amazon’s flexibility in pushing first-party vs. third-party inventory and its Prime offering both serve as major advantages in its retail business, and its multi-year head start in the cloud has led to a 40%+ AWS global market share.

-Doug Anmuth

Stifel (Buy, $2,600 PT unchanged)

We believe Amazon will be better positioned following COVID-19 given the upcoming substantial dislocation in traditional retail and long term benefit in cloud services as digital transformation accelerates.

-Scott Devitt

Morgan Stanley (Overweight, PT raised from $2,400 to $2,600)

AMZN’s results re-enforced our views that the current work from home and shelter-in dynamics are likely to lead to faster ecommerce growth, faster AMZN share gains and a longer AMZN growth runway. Further, we don’t believe consumer demand is the constraint to 2Q rev growth…as the constraint seems to be more AMZN’s capacity and ability to fulfill the demand. This, in our view speaks to how behavior is shifting online and toward AMZN faster than even they can hire/train/build.

-Brian Nowak

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