Financial report outlook | Amazon.com, Inc. (AMZN.US) Q4 performance expected to "explode" again, analysts' target price to increase by nearly 30%

Amazon.com, Inc. (AMZN.US) will release its fourth quarter financial report after the market closes on February 5th, Eastern Time. Financial analyst Nova Capital stated that, considering the expected business growth levels in the coming years, Amazon.com, Inc. appears to be quite cheap. There is a potential for over 28% growth in the next 12 months, and the performance in the fourth quarter is expected to be very strong. As one of the largest companies in the world, Amazon.com, Inc. (AMZN.US) continues to show strong growth momentum. According to data, the company's revenue has increased from $107 billion in 2025 to over $637 billion in the past 12 months (TTM), while operating income has gone from around $2.2 billion to about $68.6 billion during the same period. It is worth noting that forward-looking forecasts do not show a significant slowdown in this momentum, at least in the coming years, making the continued expansion of this behemoth appear unique. Ahead of the upcoming financial report, financial analyst Nova Capital has rated Amazon.com, Inc. as a "buy." As some analysts have stated, there is a high probability of another "blowout" performance in the fourth quarter, despite the stock reaching historic highs, it is still considered attractive. This is not just based on intuition or simple speculation about the past few quarters. Recent developments have made the current market consensus expectations appear quite pessimistic and fragile, especially regarding the outlook after the fourth quarter. The company's guidance for the 2026 fiscal year should be strong and will serve as a good catalyst for bullish momentum. Amazon.com, Inc. released its third quarter financial report in late October. Despite market consensus expectations being higher than management's guidance at that time, the company exceeded expectations in both revenue and earnings per share (EPS), with significant margins of 1.35% and 25.3% respectively. In summary, this marked the eleventh consecutive quarter of EPS exceeding expectations. While a margin of over 25% exceeding expectations may seem solid, it has become the norm for Amazon.com, Inc. since the end of 2022, with the weakest margin being 16.77%. Management has set revenue guidance for the fourth quarter between $206 billion and $213 billion, implying a year-over-year growth rate of 11.56%. According to data, market consensus expectations in late October were around $207.95 billion, closer to the lower end of the guidance range. Therefore, considering Amazon.com, Inc.'s tendency to provide conservative guidance, analysts quickly updated their models and added their own premiums based on the midpoint of the latest guidance. Naturally, this process also affected EPS expectations, explaining the common trend of optimistic profit revisions seen after the third quarter financial report. With its capital expenditure plans already implemented for the 2025 fiscal year, Amazon.com, Inc. stands out with a high probability of success, and its capital expenditure for the 2026 fiscal year is expected to exceed $150 billion, the highest among the "tech seven giants." Especially in the fourth quarter, Amazon.com, Inc. is on track to double its total capacity by the end of 2027, adding another 1,000 megawatts or even more capacity. This additional capacity added in the fourth quarter should help address the issue mentioned in the previous quarter's comments, where the current AI infrastructure demand exceeded available supply in the AWS sellout environment. With increased capacity, the conversion of backlog orders into actual revenue should accelerate, and AWS revenue should maintain a higher profit margin relative to the e-commerce business. Therefore, the continued shift in business structure towards AWS and the support of existing operational leverage seem to be ongoing, increasing the likelihood of performance exceeding consensus expectations at the high end of revenue and EPS. When it comes to capacity building beyond the fourth quarter, the opportunities for EPS growth appear more clear as they are essentially positioning themselves for their highest-profit segments to contribute above-average operational revenue over the next few years. Nova Capital states that this is also why they believe the downward revision of EPS data for the 2027 fiscal year is too aggressive. The market will gradually realize that this negative sentiment is not supported by Amazon.com, Inc.'s actual performance. Therefore, Nova Capital believes that concerns about deteriorating free cash flow (FCF) have been exaggerated, and the future return on invested capital (ROIC) will be achieved through the monetization of backlog orders as capacity expands. Once the market realizes this, the stock price will be revalued upwards. Another positive factor that could impact the stock price trends after the fourth quarter financial report is the management's latest decision to cut approximately 10% of the company's workforce, shifting from high-cost labor to AI-driven agents and machine learning models. In fact, they can save FCF expenditures and reinvest these salary savings into AI infrastructure development. This adjustment may result in an increase in profit margins, leading to an upward revision in EPS expectations for the 2026-2027 fiscal years. Amazon.com, Inc. is one of the cheapest among mega-cap stocks. Looking at the one-year forward price-to-earnings ratio of mega-cap companies, Amazon.com, Inc.'s pricing is close to or lower than the group's average level. But compared to other companies in the list, Amazon.com, Inc. will achieve the highest growth rate in EPS (over the next two years). This growth advantage over similar-sized peers gives Amazon.com, Inc. the moral right to trade at a PE ratio of 28-30 times by the end of 2027. The annual consensus EPS for the company's 2023 and 2024 fiscal years exceeded by 6.8% and 7.46% respectively, so it is expected that the consensus EPS for the 2026 fiscal year will stay above average, and for the 2027 fiscal year, it will exceed by another 5%. Based on calculations, the projected EPS for the 2027 fiscal year is $8.43 * 1.0713 = $8.431131; the forecasted EPS for the 2027 fiscal year = $8.431131 * 1.2185 * 1.05 = $10.79. Calculating at a PE ratio of 29 times, the target price for Amazon.com, Inc. for the next 12 months is set at $312.82 per share, which is 28.7% higher than the current stock price.