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Earnings Outlook: Amazon earnings: The e-commerce giant has a history of missing expectations in the holiday quarter

Amazon.com Inc. is scheduled to report fourth-quarter earnings on Thursday after the closing bell and SunTrust Robinson Humphrey analysts warn the e-commerce giant has a patchy track record with holiday quarter estimates.

Analysts there expect a “solid” fourth-quarter report, but leave the door open for a miss.

“History shows that Amazon has had limited success in exceeding Street expectations for revenue in 4Q, likely due to the lack of visibility at the time guidance is given, and difficulties in forecasting a high amount of sales volume in such a small window,” analysts wrote.

Before the fourth quarter of 2017, the last time Amazon

AMZN, -2.54%

  exceeded Street expectations was fourth-quarter 2009, according to SunTrust.

“To be clear, Amazon fares OK with meeting its own expectations, having exceeded the midpoint of its Q4 guidance 67% of the time in the last nine Q4 prints, and four out of the last five,” the note said.

Amazon has guided for revenue of $66.5 billion to $72.5 billion.

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Amazon has an average buy stock rating and $2,146.26 price target, according to 48 analysts polled by FactSet.

Here’s what to look for:

Earnings: FactSet expects earnings per share of $5.63, up from $2.16 last year.

Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts, buy-side analysts, hedge-fund managers, company executives, academics and others, expects EPS of $5.82.

Amazon has beat FactSet earnings expectations the last five quarters.

Revenue: FactSet expects revenue of $71.88 billion, up from $60.45 billion last year.

Estimize expects revenue of $71.82 billion.

Amazon missed revenue expectations the last two quarters.

Stock price: Amazon shares have fallen 6.3% over the last three months, but have gained 21.2% over the past year.

The S&P 500 index

SPX, -1.03%

  is down 1.5% over the last three months, and down 6.2%for the past 12 months.

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Other things to watch for:

-Strong holiday sales: Holiday sales were the strongest in six years, according to Mastercard Inc. data, with online sales up 19.1% from the year before.

Based on proprietary data, Stifel analysts estimate that more than half of U.S. households have an Amazon Prime account. Consumer Intelligence Research Partners Inc. puts the number at 101 million.

“We believe the record holiday season for U.S. e-commerce, strong Prime membership growth, and investments in free shipping bode well for Amazon’s retail business in 4Q,” Stifel wrote in a note.

SunTrust also suggests that there has been year-over-year and quarter-over-quarter e-commerce acceleration thanks to low unemployment and high consumer confidence.

-Ad business on the rise. “We see significant growth potential from Amazon’s advertising business over the next several years as the company leverages its valuable consumer data/traffic volume to provide sellers and brands with more tools to effectively reach consumers,” wrote Stifel analysts.

Stifel rates Amazon shares buy with a $2,400 price target.

Stifel analysts suggested in an Oct. 31, 2018 note that investor focus should shift to gross profit growth and away from revenue because of a “business mix shift” as Amazon’s cloud and advertising businesses gain prominence, and third-party retail sales volume increases.

Susquehanna Financial Group analysts say their checks indicate continued momentum in 2019 as ad spend increases, advertising technology improves, and the company makes key new hires from large agencies on the sales side.

Susquehanna rates Amazon shares positive with a $2,250 price target.

-Concerns in India. New e-commerce regulations in India go into effect on Feb. 1 that tighten restrictions on foreign companies operating in the company. For example, foreign companies will be banned from exclusive online sales partnerships.

J.P. Morgan analysts think the new rules will be a “disruption” to Amazon’s business if they’re put into full effect.

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“[U]nder the new policy Amazon would need to sell its stake in Cloudtail/Appario, and Cloudtail (and potentially Amazon’s three other big wholesale customers) would need to diversify its inventory purchases such that Amazon represents 25% or less of its inventory sourcing, down from ~50% today,” J.P. Morgan said.

J.P. Morgan rates Amazon shares overweight with a $2,100 price target.

-Amazon Go is retail of the future. RBC Capital Markets analysts think retail will be transformed by Amazon’s cashier-less Go stores. There are currently nine Go stores in San Francisco, Chicago and Seattle, according to the Amazon website, with one more to come in Chicago in 2019.

RBC analysts estimate that each Go store is making between $1.10 million and $1.95 million annually.

“Overall, current Go store sales are not material to Amazon in any way, but what is important here is market opportunity,” analysts wrote.

RBC quotes media reports that Amazon is considering 3,000 more stores by 2021, including in airports.

RBC rates Amazon shares outperform with a $2,300 price target.