Amazon Effect in Retail

When Amazon.com (AMZN) reports second-quarter earnings Thursday after the markets close, all eyes will be on the e-commerce giant’s retail and cloud computing businesses.

On average, analysts are expecting $29.56 billion of revenue and $1.11 of earnings per share. Amazon posted $23.18 billion in sales and 19 cents of EPS during the corresponding period a year ago.

“We believe Street estimates for the quarter are reasonable,” wrote RBC Capital Markets analyst Mark Mahaney in a recent note.

Margins will be a critical factor for the second quarter, he noted, while acknowledging that investments in international markets, Amazon Web Services (AWS) and Pillar Projects will weigh on the Seattle-based company’s profitability.

Retail revenue growth in North America and overseas will also be an important data point for Amazon, Mahaney added.

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Should retail and AWS hold up, Amazon will likely post another solid quarter, said Maxim Group analyst Tom Forte in an interview.

“I’d be careful and sell some of the other retailers that have moved up here ahead of Amazon,” said founder of TheStreet Jim Cramer.
“That may be a more important story/ Amazon may be taking an increasing part of the pie.”

Amazon has been on a solid run this year, with stock up about 9.1% year to date. Shares closed up about 1.1% to $736.67 per share on Wednesday and traded up $10.78, or 1.5%, Thursday to $747.82 per share.

AWS, which competes with Microsoft’s (MSFT) Azure and Alphabet’s (GOOGL) Google Cloud Platform, has emerged as Amazon’s engine of growth thanks to the tech market’s ongoing shift to cloud from hardware. Last year, Amazon saw its cloud revenue grow by an impressive 70% to $8 billion.