- Raymond James analyst Aaron Kessler maintained Outperform on Amazon.Com Inc (NASDAQ:AMZN) ahead of Q4 results.
- The analyst expects solid long-term eCommerce growth for Amazon, continued leadership in cloud and AWS with some NT risk to Street revenue estimates, high-margin advertising growth, and improving margins for core Retail.
- Kessler expects Q4 muted retail growth given tough comps, macro slowdown (particularly in Europe), and FX headwinds.
- Given the high margins inherent in its advertising business, slowing top-line growth for Retail implies significant losses.
- On the Q3 call, management noted slowing AWS growth as customers looked to tighten costs and specific industries' pulled back.
- Additionally, Microsoft Corp's (NASDAQ:MSFT) December quarter Azure Cloud growth indicated a slowdown. MSFT also guided Azure for the March quarter to a slowdown.
- Analyst's checks pointed to continued ad momentum for Amazon in Q4.
- Kessler believes workforce reductions could result in $4B plus reduced annualized operating expenses for Amazon.
- The analyst sought more color around 2022 CapEx plans and expected continued fulfillment and transportation buildout moderation.
- Kessler believes growth rates for AWS and potential margin improvements for Retail in 2023 will be the key focus for investors in the quarter.
- The analyst estimates total sales of $147B, above the consensus of $145.6B and guidance of $140-148B.
- Price Action: AMZN shares traded lower by 1.86% at $94.56 on the last check Wednesday.
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