Amazon is set to report its Q1 earnings report today, and all eyes will be on whether its stock will continue to rise. Even with President Trump tweeting critical messages about the e-commerce giant over the last few weeks–which did cause a large market reaction at the time–the company has regained the ground it lost. It’s back to slightly above where it was following Amazon’s last earnings report three months ago.
Still, we should be on the lookout for a few bullet points in the earnings report and conference call that could affect shares.
Trump has been tweeting about how Amazon is supposedly ripping off the United States Postal Service. And these tweets did have a huge impact on the company’s stock, in part because shipping has long been one of the costs that has hurt Amazon’s bottom line. Moody’s analyst Charlie O’Shea says he’ll be looking for insight into how much shipping cost Amazon absorbed last year. As the company has grown, it has been trying to clamp down this increasingly sunk cost.
“They didn’t disclose that number for 2017,” says O’Shea, but they had talked about it before. Some estimates put it as high as $10 billion, a huge dent in the company’s profits.
If Trump continues to pressure Amazon about its supposed bad deal with the USPS, we may end up hearing more about ways the company plans to offset its reliance on the post office. That could be a good thing in the long run: For years, Amazon has been investing in its own logistics, which could ultimately ease some of these costs.
Another thing to look out for is the performance of Amazon Web Services. Over the last few years, the cloud hosting service has blossomed into one of Amazon’s top performing units. Amazon’s large profits, in fact, are due to AWS, more so than its core business. While North American e-commerce did deliver profits in 2017, international losses put that business in the red. Meanwhile, AWS saw $4.33 billion of operating income on $17.46 billion of sales.
If AWS hasn’t grown at the same rate, that could give some investors pause.
Prime And Other Ambitions
Finally, one big question hovering over Amazon’s earnings is how well its investments are doing, and whether they will pay off in the long run. We now know that Prime has over 100 million subscribers. Its other ambitions–including advertising and video–have yet to show real gains in terms of helping the bottom line.
We’ll be on the lookout for any clues about those programs. The company generally doesn’t share too many details, but even a small glimpse will hopefully paint a picture of what to expect for 2018.
At the same time, the stock continues to hold up no matter what politics happen at the periphery. As O’Shea says, “Amazon is benefiting from as patient a shareholder base as I’ve seen.”
With investors happy for the time being, it’s unlikely any announcements today will make for a huge dip. Amazon delivers financial results this afternoon after the closing bell. A conference call is scheduled for 2:30 p.m. PT. We’ll have full coverage then.