Cantor is maintaining its Overweight rating and $1,050 PT on AMZN ahead of 2Q17 results, scheduled to be released 7/27 after the market close. Overall, Cantor expects another solid quarter, with 22.5% Y/Y revenue growth, driven by a growing share of retail, robust third-party unit growth, and the rapid rise of AWS. Additionally, comScore's latest e-commerce brief is supportive of healthy and sustained e-commerce growth in the U.S., while another successful Prime Day bodes well for sustained momentum in 3Q17.
Cantor 2Q17 revenue, EBITDA, and GAAP EPS estimates are $37.240B (+22.5% Y/Y), $4.630B (12.4% margin), and $1.29 vs. consensus (FactSet) estimates of $37.20B, $4.64B, and $1.41, respectively. Cantor expects gross profit to increase 24.0% Y/Y to $13.914B, for a gross margin of 37.4% (up 50bps Y/Y), reflecting a higher mix of AWS, 3P, and digital, partially offset by aggressive investment in devices, content, and fulfillment.
Online retail sales (ex travel) increased 14.3% Y/Y in 2Q17, consistent with +14.5% Y/Y in growth in 1Q17, according to comScore's latest eCommerce brief. Cantor is modeling for North America revenue to increase 21.2% Y/Y to $21.414B (vs. +23.5% Y/Y in 1Q17), and International revenue to increase 19.6% Y/Y to $11.771B (vs. +15.6% Y/Y in 1Q17). 3P sales should continue to grow at a faster clip than those of 1P, a trend that Cantor views as negative for revenue growth, but positive for gross profits, and Cantor expects AWS revenue to increase 40.5% Y/Y to $4.056B (vs. +42.7% Y/Y in 1Q17).
Cantor is modeling for a GAAP operating margin of 2.9%, consistent with 2.8% in 1Q17, but down from 4.2% in 2Q16, primarily reflecting aggressive investment in devices, content, and fulfillment. Consensus estimates for 3Q17 currently call for revenue of $39.975B (+22.2% Y/Y) and operating income of $931M (2.3% margin).