(By Rich Bieglmeier) Amazon.com Inc. (AMZN) is scheduled to report earnings after the market closes on Tuesday, January 29, 2013 with the conference call scheduled for 5:00 p.m. ET. Wall Street anticipates that AMZN will earn $0.27 for its 4th quarter. iStock expects the NASDAQ 100 member to report earnings that will exceed Wall Street's consensus number. The iEstimate is $0.32 – a 5 cent upside surprise.
Amazon.com, Inc. operates as an online retailer in North America and internationally.
Based on AMZN's lofty valuations, investors might be inclined to think Amazon crushes Wall Street's views every time their quarterly report card is released. Annoying buzzer BUZZ, WRONG! The online retailer has missed the consensus mark two quarters in a row, three for the last five quarters, and four of the last seven quarters.
You might be wondering why iStock's iEstimate calls for an upside surprise? Amazon has produced a plus EPS surprise for Q4 for the past four years, with an average surprise of 47%. While actual results have been spotty relative to the Street's consensus, AMZN's price performance in the days surrounding earnings has been considerably more predictable.
Shareholders were made happy in nine of the last 16 earnings announcements with an average gain of 11.57%. Meanwhile, downside was limited to an average of 2.96%. Although the spread between the number of winning trades and losing trades is two, the reward to risk ratio stands at 3.9 to 1. That means earnings traders only needed to be right one out of four times to breakeven based on past performance (and you know what the lawyers say about that).
iStock found a number of positive clues on the way to Tuesday's announcement. According to the National Retail Federation, "non-store [online] holiday sales grew 11.1%" for November and December of 2012 versus 2011.
See if you find these stats anywhere else (except for the source, of course), digital marketing agency, RKG reports, "Amazon Product Ads were the largest traffic driver in Q4, with 25% of CSE (Comparison Shopping Engines) clicks." RKG also found "All of the top paid CSEs saw conversion rates hit 2012 highs in Q4." Put into English, it means when online shoppers were searching for comparison prices, Amazon got 1 out of every 4 clicks. Meanwhile, the number of clicks that turned into sales hit their peak during the 4th quarter.
Now, we can't let a story about an online retailer go by without turning to the trusty Google Trends tool. Man, the numbers look good here. Year-over-year (YoY) search queries for Amazon were up 21%, quarter-over-quarter (QoQ) they increased 35.2%.
iStock expects to see a spike in the number of "Amazon Prime" memberships when Tuesday's results are released. Google Trends reveal a YoY jump of 80.7% and QoQ of 56.6%. To verify what we found, iStock doubled up with the keywords "Amazon Prime Login," whoa horsey, slow it down, up 71% compared to the 3rd quarter – OUTSTANDING!
While the clues piece together in a way that should deliver strong earnings for Q4, there are some potential potholes for the year ahead. DailyTech.com says ChannelAdvisor research found that Amazon sales suffered in California thanks to a new, online sales tax. Starting in September 2012, "Amazon started collecting a [California] sales tax of 7.25 percent to 9.75 percent." The story went on, "After the sales tax collection began, sales in California matched those of other states. In early November 2012, California sales fell 10 percent below sales in other states." The impact reportedly moderated by the end of the quarter, but we'd expect more cash starved states to jump on the online sales tax bandwagon in 2013.
Overall, iStock believes all the clicks have lined up for Amazon.com Inc. (AMZN) to have a great fourth quarter. While we do believe new, online sales taxes could impact AMZN's sales and share price as 2013 unfolds, iStock feels the move towards wireless and ingrained habits will mute most of the fears.