For Amazon's core e-commerce business, all signs point to a big second quarter -- which marks the first one that overlapped entirely with the COVID-19 pandemic.
A increase in demand for home delivery should deliver a major boost to Amazon's top line. On average, analysts polled by FactSet are expecting overall revenue of $80.6 billion for the quarter ending June 30, up from $63.4 billion in the year-ago quarter.
But don't get your hopes up for a corresponding boost in profits, wrote Wedbush analyst Michael Pachter in a note this week. Pachter raised his price target for Amazon (AMZN) - Get Amazon.com Inc. Report to $3,050 from $2,750, and maintains an Outperform rating.
That's because Amazon's spending on safety-related measures is "unlikely to slow down anytime soon," Pachter wrote.
In its first quarter update, Amazon announced that it would spend as much as $4 billion in the current quarter on its COVID-19 response, and the pandemic has not subsided since then. COVID-19 cases surged anew in several U.S. states this week, and infections are also increasing in other parts of the world are also increasing.
That makes Amazon's profit outlook difficult to predict until investors are able to glean more from its profit trends in the pandemic, Pachter wrote. The current Wall Street EPS consensus for the June quarter is $1.34, down from $5.01 in Q1.
There are still several positive trends working in Amazon's favor, however.
Consumers that might have otherwise shopped at brick-and-mortar stores have adopted home delivery by necessity this year, but those habits are likely to stick for many of them. In a recent Wedbush survey, roughly 40% of respondents expected to spend less in-store, and around 40% expect to spend more online after the pandemic is over. And once COVID-19 related spending subsides, Amazon has the ability to deliver robust profits once again alongside its revenue growth.
Amazon shares are up 45% year to date, and closed Thursday's trading session up 0.7% to $2,754.58.