3 things you'll want to know when Amazon reports Q1 earnings

The e-commerce retailer will report on Thursday, April 29.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Amazon (NASDAQ: AMZN) is coming off a remarkable fourth quarter with $125 billion in sales. That staggering figure will be difficult to repeat. Still, the outlook is optimistic as the e-commerce retailer and technology giant gets ready to report first-quarter earnings on Thursday, April 29.

Folks are shopping more on Amazon because it offers convenience, but more importantly as of late they are doing so because it offers some safety from exposure to the coronavirus. Investors will home in on the second part of that equation when Amazon reports first-quarter earnings.

More than 150 million people in the U.S. have received at least one dose of a coronavirus vaccine. Shareholders are wondering what will happen to customer shopping habits as more of the population gets vaccinated. In that context, here are three things you will want to take note of in the next earnings release.

Three factors to watch in Amazon's next report

The first thing investors will want to look at is net sales. The company is guiding for growth of 36% year over year at the midpoint, which would be another quarter of over $100 billion in revenue. Folks appear to be maintaining the shopping habits they developed during the pandemic. And even though vaccinations are gaining momentum worldwide, the end of the pandemic regretfully is still nowhere in sight. That could mean a sustained increase in spending at Amazon.

Second, those interested in Amazon stock will want to know how much operating income it earned in the quarter. The e-commerce retailer is spending roughly $2 billion every quarter on COVID-related expenses, weighing on profits even as sales are surging. The hope is that if Amazon continues to serve customers well during the pandemic, then in the aftermath, COVID-related expenses will drop off while many of the newly attracted customers will remain. But even with the billions of extra costs, Amazon's operating income surged in 2020, rising 57% from the previous year.

And third, look for management to discuss how consumer behavior is changing as people in the U.S. are leaving their homes more often. Amazon proved a reliable and safe supplier of essential items for people during the most acute phases of the pandemic. Now as over 135 million people in the U.S. have received at least one dose of a coronavirus vaccine and are starting to feel more comfortable leaving their homes, it could hurt sales at Amazon.com.

What this could mean for investors 

Analysts on Wall Street expect Amazon to report revenue of $104.36 billion and earnings per share of $9.45, which would be increases of 38.3% and 88.6%, respectively, year over year. The revenue estimate is slightly higher than the midpoint of management's guidance. 

The surges in revenue and new customers are pushing profits at Amazon to record levels at an extraordinary rate. For instance, operating profit in 2020 was $22.9 billion, up more than 10 times from the $2.2 billion in 2015. But Amazon's stock is only up about 1% year to date. That can partly be due to investor fears about a drop in sales in the aftermath of the pandemic as consumers return to their old habits. However, if you're in it for the long haul, Amazon's trajectory remains positive.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Parkev Tatevosian has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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