Amazon earnings preview via Bank of America

• Expecting some profit pressure from elevated transportation and gas cost

Amazon will report first-quarter 2022 results on Apr 28, BofA lower rev/GAAP to $116.0bn/4.7bn VS. street at $116.4bn/5.3bn, on lower International revenues. For first-quarter, BofA aggregated credit and debit card online spending data declined 3% Y/Y. 5pts lower than +2% Y/Y growth for 4Q'21 on very difficult comps, and analyst expect some profit pressure from elevated transportation and gas cost (third-party seller fee hike kicks in on 4/28) and wage inflation.

Versus the Street, analyst expect slightly lower ex-FX retail revenues. AWS should be a bright spot BofA are at 37% 1Q rev growth VS. Street at 35%, and checks suggest advertising revenues reaccelerated in 1Q, which could be positive for margins. AWS mostly bills in USS. but has some costs in Intl FX, so could see an FX margin benefit.

BofA adjust 2022 estimates for increasingly difficult FX headwinds, gas cost impact on shipping that may be somewhat offset by a 5% hike on FBA fees (raising third-party revenue, but lower gross margins), and switch the assumption of Prime Day timing from 2Q to 3Q (-$2.5bn reduction in revenue for 2Q, similar increase for 3Q).

BofA est. shipping costs of $94bn in 2022, and a 20% Y/Y increase in gas could drive a $2.5bn increase in annual costs. Overall, analyst lower total '22E revenues by $5.5bn, primarily for FX and 1Q profit from $5.8bn to $4.7bn, and lower 2Q profit from $6.7bn to $5.5bn. 2H'22E profits are relatively unchanged. Analyst believe 2Q revenue guidance may be $116bn to $120bn, which is $6bn below Street at $126bn at high end, with profit guidance of $2.25bn to $5.25bn (Street al $5.3bn for 2Q profit). BofA would expect management to call out FX headwinds and shift in Prime day. which could aid sentiment if 2Q guide is below Street.

Inflation clouds the 2022 margin recovery story, but Amazon remain analyst top FANG stock, with 2H eCommerce acceleration, margin improvement from a very low base ($70bn in 2023 profit potential from third-party. AWS and advertising), and enterprise exposure (corporate capex cycle) key differentiators. Analyst lower price objective to $4,225 from $4,450 to reflect lower revenue ests and multiple compression in cloud sector.