Monday, April 25, 2011 Inc. (NASDAQ: AMZN): Q1 Earnings Preview 2011 Inc. (NASDAQ: AMZN), the largest online retailer, is scheduled to release its first-quarter earnings after the closing bell on Tuesday, April 26, 2011. Analysts, on average, expect the company to report earnings of 61 cents per share on revenue of $9.52 billion. In the year ago period, the company reported earnings of 66 cents per share on revenue of $7.13 billion., Inc. operates as an online retailer in North America and internationally. It also manufactures and sells the Kindle e-reader. The Company offers programs that enable sellers to sell their products on its Websites and their own branded Websites. Amazon’s Cloud storage solution offers what would be an easy way to transfer, share and sync files between a smart phone, tablet or even PC/Mac.

In the preceding fourth-quarter, the Seattle, Washington-based company's net income was $416 million or 91 cents per share, compared to $384 million or 85 cents per share in the prior year quarter. Revenue climbed 36% to $12.95 billion from $9.52 billion in the same quarter of 2009. Analysts, on average, expected the company to report earnings of 88 cents per share on revenue of $12.98 billion. 

At its last earnings call in January, Amazon said that it expects first quarter revenue of $9.1 billion to $9.9 billion, or to grow between 28% and 39% compared with first quarter 2010. Operating income is expected to come in between $260 million and $385 million — implying a margin range of 2.9% to 3.9%.

The company has benefited from strong consumer demand for its  Kindle e-reader, solid e-commerce growth and accelerating demand trends witnessed over the recent holiday period. As usual, investors will be alert for any concrete details on sales of Amazon's Kindle e-reader. The company has never disclosed how many it has sold, though it has said the Kindle is its best-selling product and that millions of people read Kindle books on the device itself and on free Kindle apps for smart phones and computers.  The company is launching a new, lower-priced version of the device that displays ads on the main screen.

Last month, the company announced a new “cloud-based” music service that allows user to store digital-music files on its servers and access them from any computer or smartphone running on the Android mobile platform. In February, Amazon launched a video streaming plan for subscribers to its Prime service. The online retailer said that members of Prime will be get unlimited, commercial-free, instant streaming of more than 5,000 movies and TV shows without additional charge. 

On the downside, there are signs that the growth trajectory at Amazon is tapering. Whereas sales expansion remains brisk, hitting 36% in the seasonally strong fourth quarter, profit growth was marginal.

A key advantage for Amazon is that it doesn’t collect sales tax. That allows for lower prices, which is important since the company’s margins are already at rock-bottom levels.  However, with the growing budget deficits in many states, there is a good chance there will be more focus on deriving revenue from e-commerce transactions.  One way to do this is to impose charges on online affiliates, which are partner sites for Amazon.  Already, there is pending legislation in California, Hawaii, New Mexico, Minnesota and Vermont. Last year Texas presented a $269 million tax bill to In February, Amazon closed its Dallas area fulfillment center and canceled a planned expansion of its operations in Texas after the online retailer failed to reach an agreement with the state over taxes.

Moreover, Amazon’s high valuation cools the enthusiasm of some analysts. The company's stock currently trades at a forward P/E (fye 31-Dec-2012) of 42.04 and PEG Ratio (5 yr expected) of 2.30. 

Full Disclosure: None.
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