Yahoo Finance Why Should You Buy Amazon ETFs Ahead of Q1 Earnings?
Amazon AMZN is set to release first-quarter 2024 results on Apr 30, after market close. Being a market leader in e-commerce, it is worth taking a look at the company’s fundamentals ahead of its results (see: all the Consumer Discretionary ETFs here).
Amazon has risen 4.5% over the past three months, outperforming the industry, which saw a decline of 1.2%. The outperformance is expected to continue, given that the online behemoth has an increased chance of beating estimates in its quarterly report. It saw positive earnings revision activity, which is generally a precursor to an earnings beat.
Given this, investors could tap this opportune moment through ETFs with a substantial allocation to this online behemoth. These include ProShares Online Retail ETF ONLN, Fidelity MSCI Consumer Discretionary Index ETF FDIS, Vanguard Consumer Discretionary ETF VCR, Consumer Discretionary Select Sector SPDR Fund XLY and VanEck Vectors Retail ETF RTH.
Inside Our Methodology
Amazon has an Earnings ESP of +7.51% and a Zacks Rank #2 (Buy). According to our surprise prediction methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The stock saw a positive earnings estimate revision of a penny in the past seven days for the first quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a pretty good indicator of some favorable trends for the stock. The Zacks Consensus Estimate implies massive year-over-year earnings growth of 161.3% and substantial revenue growth of 11.9% for the to-be-reported quarter. Additionally, Amazon’s earnings surprise history is impressive, with a surprise of 51.04%, on average, in the last four quarters. The stock has a solid VGM Score of A and falls under a top-ranked Zacks industry (top 13%).
Amazon currently has an average brokerage recommendation (ABR) of 1.11 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 46 brokerage firms. Of the 46 recommendations deriving the current ABR, 42 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 91.3% and 6.52% of all recommendations.
Based on short-term price targets offered by 43 analysts, the average price target for Amazon comes to $208.86. The forecasts range from a low of $140.00 to a high of $235.00.
Solid Growth Prospects
Amazon's growth story hinges on its robust retail business, its strong cloud division, growing investments in generative AI, its solid advertising business and expanding streaming services.
The new CEO, Andy Jassy, forecasts that the company will get a boost from strategic cost cuts, cloud-computing demand and the growth of artificial intelligence. In his annual letter to shareholders, Jassy highlighted the tech giant's approach to generative AI, which he described as Amazon's next potential pillar of growth, following its e-commerce marketplace, Prime subscription service and Amazon Web Services cloud-computing business. "Generative AI may be the largest technology transformation since the cloud (which itself is still in the early stages), and perhaps since the Internet," Jassy wrote.
Amazon's strategic plans for growth are also highlighted by its possible entry into the grocery sector and its focus on "primitives" to drive innovation. In the near future, legal issues could present hurdles but advancements in AI have the potential to transform multiple industries, offering both challenges and prospects (read: 5 ETFs to Tap Amazon's Growth Story).
Given the bullishness in AI transformation and the leadership transition to Andy Jassy, Amazon hit a new all-time high in almost three years in the Apr 11 trading session, reflecting a dramatic rebound from its slump in 2022 and the resurgence of confidence in Amazon’s future growth potential. Further, Amazon joined the blue-chip index Dow Jones Industrial Average at the end of February, which underscores its strong business growth potential.
In its last earnings release, the world's largest online retailer expected revenues to be in the range of $138-$143.5 billion for the first quarter of 2024, implying year-over-year growth of 8%-13%.
ETFs in Focus
ProShares Online Retail ETF (ONLN)
ProShares Online Retail ETF offers exposure to companies that principally sell online or through other non-store channels and then zeros in on the companies that reshape the retail space. It tracks the ProShares Online Retail Index, holding 18 stocks in its basket. Amazon is the top firm, accounting for 23.9% of the portfolio (read: E-Commerce Boosts U.S. Retail Sales: ETFs to Tap).
ProShares Online Retail ETF has amassed $94.3 million in its asset base and currently trades in a moderate volume of around 16,000 shares a day on average. It charges 58 bps in annual fees from investors.
Fidelity MSCI Consumer Discretionary Index ETF (FDIS)
Fidelity MSCI Consumer Discretionary Index ETF tracks the MSCI USA IMI Consumer Discretionary Index, holding 285 stocks in its basket. Of these, Amazon takes the top spot with a 23% share.
Fidelity MSCI Consumer Discretionary Index ETF has amassed $1.4 billion in its asset base while trading in a good volume of around 79,000 shares a day on average. It charges 8 bps in annual fees from investors and has a Zacks ETF Rank #2 with a Medium risk outlook.
Vanguard Consumer Discretionary ETF (VCR)
Vanguard Consumer Discretionary ETF currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index and holds 304 stocks in its basket. Of these, Amazon occupies the top position, with a 23.1% allocation. Broadline Retail takes the largest share at 25.5%, while automobile manufacturers, restaurants, and home improvement retail round off the next three spots.
VCR charges investors 10 bps in annual fees, while volume is moderate at nearly 48,000 shares a day. The product has managed about $5.3 billion in its asset base and carries a Zacks ETF Rank #1 with a Medium risk outlook.
Consumer Discretionary Select Sector SPDR Fund (XLY)
Consumer Discretionary Select Sector SPDR Fund offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index. It is the largest and most popular product in this space, with AUM of nearly $19 billion and an average daily volume of around 4 million shares. Holding 52 securities in its basket, Amazon takes the top spot with 23.5% of assets. Broadline retail, hotels, restaurants & leisure, specialty retail and automobiles are the top four sectors with double-digit exposure each.
Consumer Discretionary Select Sector SPDR Fund charges 9 bps in expense ratio and has a Zacks ETF Rank #1 with a Medium risk outlook.
VanEck Vectors Retail ETF (RTH)
VanEck Vectors Retail ETF provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index, which measures the performance of the companies involved in retail distribution, wholesalers, online, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. Amazon takes the top position in the basket with a 20.9% share.
VanEck Vectors Retail ETF has amassed $204 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 6,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #2 with a Medium risk outlook.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
VanEck Retail ETF (RTH): ETF Research Reports
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
Fidelity MSCI Consumer Discretionary Index ETF (FDIS): ETF Research Reports
ProShares Online Retail ETF (ONLN): ETF Research Reports
