Earnings Outlook: Amazon earnings preview: Recession fears could drive discounts for Amazon’s cloud computing services

by | Jul 26, 2022 | Stock Market

With recession fears looming, Amazon.com Inc.’s cloud service business could be under pressure warns Mizuho Securities analysts in a note heading into the tech giant’s second-quarter earnings announcement scheduled for Thursday. Mizuho analysts recently conducted a call with IT service firms, finding that chief information officers forecast “a shallow recessionary scenario” and will reduce their spending by about 10 points in fiscal 2023.

“To mitigate any weakness in demand, leading cloud vendors like Oracle and NetSuite started to offer meaningful discounts to gain share in the low-end of the market,” Mizuho wrote in a recent note. “At the same time, our checks indicate that AWS is considering a discount of up to 10% in September/October for new contracts/renewals when IT budgets are set forFY23.” Mizuho rates Amazon
stock buy with a $155 price target. Amazon completed a 20-for-1 stock split in June. See: Big Tech earnings are about to determine the direction of the market “Despite attractive valuation, we believe the stock lacks short-term catalysts dueto a likely downward revision cycle,” analysts said. MKM Partners also anticipates cloud service price cuts, but analysts there say that a slowdown in AWS’ business will happen sooner rather than later. “We view engagement trends in social media and streaming as revenue headwinds for AWS’ usage-based pricing model (Netflix, Snap, Spotify, Pinterest, and Meta, among the top 20 customers at AWS, in our opinion),” analysts wrote in a note published Monday. “Plus, softness in VC-funding to start-ups likely finds its way to AWS softness in 2H22 (we estimate tech startups make up 10% of AWS revenue).” MKM Partners rates Amazon stock buy with a $165 price target, down from $180. Amazon has an average buy rating and average target price of $167.80, according to 51 analyst groups polled by FactSet. Here are a few things to know about Amazon in preparation for the earnings announcement: Earnings: The FactSet consensus is for earnings per …

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