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AMZN Stock: Is AMZN Stock A Buy Going Into Amazon.com, Inc. (AMZN) Q4 Earnings?

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Seattle, Washington-based Amazon.com, Inc. (NASDAQ:AMZN) is scheduled to report its Q4 2016 earnings on Feb 2, after the bell. Wall street expects the company to report EPS of $1.35 on revenue of $44.67B, implying 35% YoY earnings growth and 25% growth in revenues.
AMZN stock is up 10.75% in the year to date, outperforming the 54.3% gains in the Nasdaq Composite (INDEX:COMPX) and 1.9% rise in the S&P 500 (INDEX:SPAL). Will the upcoming earnings report add to the current momentum in the stock? Is Amazon stock a buy ahead of the Q4 earnings report?
Amazon.com, Inc. (NASDAQ:AMZN), Amazon, Prime, Online Shopping, Laptop, Screen, Shipping

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Investors Remain Bullish Ahead Of Amazon Q4 Earnings

Amazon.com, Inc. (NASDAQ:AMZN) stock was hammered following the earnings miss in its last quarterly earnings report. AMZN stock price fell 5% in the trading session following the last earnings report. The downtrend continued over the next few trading sessions as the stock lost nearly 100 handles within a fortnight, hitting a 6-month low of $719.1 on Nov 14. AMZN stock has rallied strongly out of the Nov lows, making its way back up to close the last trading session at $830.4, closing in on its all-time high of $847.21, which it hit on October 6. The recent rally indicates that that weak hands exited Amazon stock following the Q3 earnings miss. This is a fact also reflected in investor sentiment, which has risen consistently over the last couple of months.

Amazon investor sentiment

Source: Stocktwits

Will The Strong Holiday Season Drive An Earnings Beat?

A lot of focus will be on the retail segment, as the holiday shopping season-driven Q4 is essentially the strongest quarter for the segment. Amazon had a very strong holiday season (1), as the e-tailer accounted for over 40% of total online sales through the holiday season. In a recent bullish note, Jefferies analyst Brian Fitzgerald reiterated a buy rating with a $950 price target.

The analyst wrote, “We believe AMZN had a very strong holiday season with record number of people trying out Prime – one of the Co’s key rev growth drivers. Data suggest FBA had a strong qtr too. On margins, we don’t expect any negative surprises despite the recent step-up in investment (new fulfillment capacity and digital content).

The record number of people trying out Amazon Prime is a significant bonus for Amazon, not only for this quarter but for many more quarters to come. We believe Prime is a key value driver for Amazon stock.

The Jefferies analyst was not alone in his bullish outlook. Cantor Fitzgerald analyst Youssef Squali expects Amazon to report strong Q4 (2) earnings driven by a solid holiday quarter. The analyst reiterated his overweight rating with a price target of $1000 for AMZN stock.

Squali wrote, “We expect a strong performance with ~25%+ Y/Y revenue growth, driven by a growing share of retail, robust 3P and AWS businesses, all amid a strong online holiday season. Our checks indicate a pickup in e-commerce growth in 4Q, with mobile seeing particularly strong growth during peak shopping days (Thanksgiving-Cyber Monday). Given its size, loyal and growing base of Prime members and ever-improving customer value proposition, we view Amazon as one of the prime beneficiaries of such a trend.”

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