Online retail giant Amazon.com, Inc. (NASDAQ: AMZN) will report its third quarter financial results on Oct.24 and hold a conference call on the same day at 2:00 p.m. PT/5:00 p.m. ET to discuss the operating performance.
Wall Street expects Amazon to report a loss of 9 cents a share, according to analysts polled by Thomson Reuters. In the same period last year, the company reported a loss of 60 cents a share.
Amazon's results have managed to top Street view only once in the past four quarters while missing them by a wide margin on three occasions. Analysts are more pessimistic on Amazon's earnings in the last three months, when the consensus estimate was a profit of 10 cents.
Quarterly revenue is expected to rise 21.4 percent to $16.77 billion from $13.81 billion in the same quarter last year. Amazon sees third quarter net sales between $15.45 billion and $17.15 billion, or to grow between 12 and 24 percent over the third quarter of 2012. The market could look at the contributions of North America and International markets.
Amazon is sacrificing near-term profitability to drive long-term growth as it is investing heavily in Kindle tablets, TV content, Video library and AWS. These heavy investments are weighing on gross margins resulting in losses. Amazon expects third-quarter operating loss to be between $440 million and $65 million, compared to $28 million in the third quarter of 2012.
The company recently began shipping of its third generation of Kindle Fire tablets dubbed the Kindle Fire HDX, which could be available for as low as $229. The company also announced the Kindle Fire HD for $139.
During the quarter, Amazon introduced Kindle MatchBook, a new benefit that gives customers the option to buy—for $2.99, $1.99, $0.99, or free—the Kindle edition of print books they have purchased new from Amazon. It also unveiled Kindle Paperwhite—the 6th generation of Kindle eReader.
The Kindle shipping timing difference versus last year, with both the 7" &! ; 8.9" versions pushed into the fourth quarter this year, could be mildly supportive to margins, at the expense of revenue growth.
"We would note that the low cost approach (Jeff Bezos meetings with the press) taken to introducing the new Kindle line would suggest a conservative approach to spending, potentially indicative of operating income pressures," UBS analyst Eric Sheridan said in a note to clients.
Meanwhile, increased fee revenues from 3P sellers should be supportive of gross margin expansion as Amazon raised 3P seller fees about 6 percent in the first quarter.
Investors could watch paid unit growth trends, which have been weakening as it has decelerated in each of the previous five quarters. That said, comps are approximately 400bps easier this quarter relative to last. This statistic has become of increasing importance given Amazon's increasing 3P mix and its impact on both reported revenue growth and gross profit margins.
"For Q3 2013, we estimate paid units grew slightly above the 29% growth seen in Q2 2013. The comparison continues to ease as we move into Q4 (32% paid unit growth posted in Q4 2012)," Sheridan noted.
There is potential for this number to reaccelerate given the combination of Amazon's recent Kindle store launches (China, Brazil, Mexico), 3P business launch in India, Amazon Fresh launch in Los Angeles, and the aforementioned easier compare.
A few additional items that may be brought up on the call or mentioned in some form include early progress related to the company's global expansion of the Kindle Appstore; early traction with 3P sellers in India; update around China strategy (Kindle, partnerships).
For the second quarter ended June 30, 2013, the Seattle, Washington-based company reported a net loss of $7 million or 2 cents a share, compared to net income of $7 million or 1 cent a share for the year-ago quarter. Net sales for the second quarter rose 22 percent to $15.70 billion.
Amazon has traded in a mixed manner following i! ts last t! wo third quarter earnings announcements, increasing 7 percent and declining 13 percent, respectively. That said, over a five year span, the average price change post third quarter results is a 5 percent gain.
Shares of AMZN have gained 8 percent since the last quarterly report and have climbed 41 percent in the last year. They have traded between $218.18 and $331.89 during the past 52-weeks.