Amazon.com (NASDAQ: AMZN) is set to report earnings after the close today. First Call has estimates pegged at $0.48 EPS and $5.37 billion in revenues. Next quarter’s estimates are $0.35 EPS and $3.92 billion in revenues; the estimates for 2008 are $1.63 EPS and $18.25 billion in revenues.
Analysts have fairly aggressive price targets on Amazon with an average north of $98.00. We’d note that shares have traded as low as $36.63 and as high as $101.09 over the last year. Up until the last pullback this has spent most of the last four months in an $80 to $100 trading band, although we’d caution that $95 or so was the top of that band on all but one day. Shares have also been hanging out for the last week or more under the 200-day moving average, which was $78.72 on last look.
Options are almost impossible to use for a predicting tool today with a high VIX, high event risk, and high volatility. If you want a guess at options as a prediction, options traders appear to be braced for a move of more than $7.25 in either direction. The short interest is also a must-see ahead of earnings, and as of mid-January the short interest was 31.4+ million shares (up 1.5% from December-end).
We do not know if Bezos & Co. will go out on a limb and offer any targets for 2008. But we are fairly certain that 2007 will be an important benchmarking for analysts as they try to come up with 2008 targets. Even with the recent sell-off we’ve seen, it doesn’t look like the analysts are going to line up in defense of Amazon.com if it makes any comments that are overly cautious ahead.
If the company meets the 2007 target, its trailing P/E ratio will be 66. With a target of $1.63 expecting almost 45% earnings growth, this forward P/E ratio is still 45.3 for 2008 targets. Sometimes valuations do matter, particularly when you are teetering on a recession or a bear market.
Jon C. Ogg
January 30, 2008
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