What's In Store For Amazon In Q4? Analyst Sees Growing AI-Contribution For AWS

BofA Securities analyst Justin Post expressed his view on Amazon.com, Inc. AMZN before the company’s fourth-quarter results, which are scheduled for release on February 6. The analyst maintained a Buy rating and a price forecast of $255.

The analyst expects Amazon to report strong results, benefiting from fulfillment and headcount leverage.

The analyst’s $187 billion sales estimate aligns with consensus, while the $19.7 billion GAAP operating profit forecast exceeds the Street’s $18.9 billion.

The analyst adds that retail data supports revenue growth, and AWS is likely to meet 19% – 20% growth expectations, aided by AI contribution (neutral Azure read-across).

Notably, the analyst writes that intra-quarter data was positive, with Bloomberg Second Measure (BSM) showing stable year-over-year growth and BAC credit & debit card data indicating accelerating online spending.

The Street estimates 8% North America retail sales growth, a slight deceleration from the third quarter, though data suggests stability or acceleration, adds the analyst.

Post anticipates North America Retail margins expansion of 90bps Y/Y to 7.0% (vs. consensus of 6.7%), led by unit growth leverage and well-managed holiday inventory and shipping.

The analyst recently revised first-quarter revenue estimate, factoring in increased FX headwinds, which is projected at a 110bps impact compared to the Street’s 40bps estimate.

Post expects first-quarter sales guidance of $152.25 billion and $158.25 billion (street estimate at $158.7 billion), implying a 17% sequential contraction at the midpoint.

Notably, the company is closing its Go store in Woodland Hills, California, this month, marking a reduction of about half in its Go store portfolio since early 2023, leaving 16 stores across four states, as per a report by WSJ.

With the company shutting down more of its convenience stores, Nick Egelanian, president of retail-advisory firm SiteWorks Retail, commented that Amazon doesn’t seem to grasp the essence of retail, the report highlighted.

Price Action: AMZN shares are up 1.78% at $241.65 at the last check Tuesday.

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