Retail might not help Amazon.com (AMZN) to an upside surprise when it reports quarterly results later this month, but other parts of the company could.
In a Wednesday note, PiperJaffray analysts said that based on their analysis of Google search trends, the Barron’s Next 50 company’s retail business suggest that “online retail revenue for Q2 is tracking in-line to perhaps slightly below consensus.”
But Amazon Web Services and advertising could still drive higher-than-expected performance for the quarter, according to the analysts, who in the note reiterated an “overweight” rating and boosted their share price target to $2,075. (That target is about 13% above current levels and among Wall Street’s highest, according to FactSet.)
“The intent to increase spend on AWS (90% of CIOs) is at an all time high,” they wrote. “We, therefore, believe that, as part of an accelerating cloud environment, AWS could beat in Q2 (Street modeling 200 basis point deceleration to 47% year-over-year on [a] 100 basis point easier comparison.” (One hundred basis points is equivalent to 1 percentage point.)
“Additionally, while we do not have direct checks on Amazon’s ad business, it has been growing at a remarkable rate,” PiperJaffray wrote. “It wouldn’t be surprising if strength in the company’s ‘Other’ revenue segment (where advertising resides) also helps to drive overall upside, even if online retail is only in-line or slightly below.”
Shares of Amazon are up roughly 55% in 2018. The company is scheduled to report Q2 financial results after the market’s close on July 26, with a conference call set for 5:30 p.m. ET. Wall Street is looking for EPS of $2.47 on sales of roughly $53.4 billion, according to FactSet.