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What To Listen For During Amazon’s Earnings Call Thursday Afternoon

Amazon Inc., the e-commerce behemoth at the forefront of most conversations involving retail innovation and supply chain logistics, will host its second-quarter earnings call Thursday afternoon after the market closes at 5:30 p.m. ET.

Here are a few things to listen for during the call.


Whole Foods Acquisition

The online player has remained tight-lipped about its plans for high-end grocer Whole Foods Market, which it will buy for $13.7B (or $42/share). Though there has been speculation regarding Amazon’s ability to use the grocer's facilities to expand its distribution network, very little has been confirmed. The purchase would give Amazon access to Whole Food’s portfolio of 450-plus stores and put the retailer close to 75 million Americans who live within three miles of a Whole Foods.

Investment Activity And Profit Margins

Amazon’s first-quarter report signaled the e-commerce giant may be willing to trade some profitability for key investment opportunities this year, which was reflected in Q1 when operating margins slumped 90 basis points to 2.8%, Morningstar reports. But analysts are not deterred by this strategy.

“With many avenues of growth ahead, we think that investors are much more likely to remain focused on top-line opportunities versus the quarterly cadence of profit,” analysts led by Eric Sheridan wrote in a note last week, according to MarketWatch. “As Amazon continues to invest in its multiple growth opportunities, we believe the company can deliver a high teens revenue compound annual growth rate (CAGR) over the medium term along with moderate margin expansion.”

According to Barron’s, analysts estimate Amazon’s earnings will fall 21% to $1.41/share in Q2, while revenue will jump 22% to $37B. Amazon’s stock price is up 40.2% since the beginning of the year and is outpacing the S&P 500 index.

Retail Disruption

Amazon has been aggressive in its retail disruption as it pushes to innovate and find a balance between physical and online retail. The e-commerce retailer continues to grab market share, and analysts like MKM Partners do not foresee that shifting any time soon, according to MarketWatch

The firm wrote in a July report that margins for the top 20 retailers continue to decline while market cap shifts to Amazon. The firm gave the retailer a $1,095/share price target. 

“We think this does not end well for traditional retailers and many will go the way of Borders and Circuit City, leaders in the first two large categories disrupted by Amazon,” MKM wrote.