Amazon.com Inc (NASDAQ:AMZN) has been tipped to beat expectations when it reports its first-quarter earnings on Thursday afternoon.
Wall Street is currently expecting the ecommerce giant to deliver earnings per share of US$1.27 in the opening three months of 2018, with sales swelling to US$49.9bn.
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But analysts at Wedbush are looking for the numbers to be even greater and are forecasting earnings of US$1.42, while revenue should top the US$50bn mark.
Part of the reason for their bullish forecast is the number of Prime subscribers, which Amazon revealed earlier this month had breached the 100mln mark.
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“We estimate that this figure is up roughly 50% y-o-y, well above the 27% combined growth that we modelled for…implying that revenue upside is likely,” said Michael Pachter in a note.
“Our 2018 revenue estimate of US$232.9bn, which contemplates growth of 31%, also appears overly conservative given that we modelled net product sales and net service sales up only 24%, excluding Whole Foods contributions of US$6bn in 2017 and an estimated US$16bn in 2018.”
That number of subscriber numbers is expected keep on climbing as well thanks to Amazon’s seemingly relentless focus on innovation.
The US$700bn company recently introduced a new delivery service for Prime customers which means items can be delivered into the trunk of their car, while Pachter and his team reckon Amazon will spend around US$6bn on video content this year.
“Despite a smaller expected outlay (than Netlfix), we continue to be impressed with the quality of many Prime Video buys, including The Lord of the Rings series and the Cortés miniseries from executive producer Steven Spielberg.”
Plus there’s the contribution from Whole Foods, which Amazon snapped up last year, which will also help boost earnings this time around.
Despite the bullish outlook, Amazon is renowned for reinvesting a considerable chunk of its profits back into the company.
Pachter cautioned: “As always [though], uneven and unpredictable spending decreases visibility into profitability.”
Amazon shares were broadly flat at US$1,61.57 on Wednesday afternoon.