Can a merry Christmas get Amazon (AMZN) shares back on track?
The e-commerce giant's stock was one of the best performers in the entire market last year, gaining 118% and more than doubling in price and forming one quarter of the much-hyped "FANG" quartet that also included Facebook (FB), Netflix (NFLX) and Alphabet's (GOOGL) Google.
But after that magnificent run, fears of an economic slowdown and retrenching consumers, along with more general investor concerns about overheated growth stocks, helped send Amazon's stock down 14% from the beginning of 2016 through Jan. 27.
Now some investors think Amazon's actual results from the important holiday shopping season report could revive the stock. On Thursday, hours ahead of the report, Amazon's shares rallied 5%.
The other three FANG stocks have also suffered in 2016, but great results on Wednesday from Facebook helped its shares rally more than 12% on Thursday.
Analysts expect Amazon will report sales of $35.9 billion for the quarter, representing a 22% gain from a year ago, according to FactSet. Earnings per share are forecast at $1.55, more than triple the 45 cents per share reported a year ago. And for 2016, analysts expect earnings will rise sharply to $5.52, triple the expected total for 2015, on revenue of $129 billion.
Much of the expected growth in profit comes from the company's cloud unit, Amazon Web Services, which continues to steal corporate IT dollars away from traditional "enterprise" tech companies like IBM (IBM) and Hewlett Packard Enterprise (HPE). But the analysts' expectations also depend on the choices made by Amazon CEO Jeff Bezos and his team to let those profits flow to the bottom line instead of reinvesting them to fuel even faster growth or expand into new business areas like drone deliveries.
So investors will be listening closely to Chief Financial Officer Brian Olsavsky on Thursday's call with analysts (Bezos doesn't typically speak on the call) for signs that a new investment phase may be underway. It was a signal from then-CFO Thomas Szkutak on Amazon's fourth-quarter call a year ago that helped ignite the Amazon rally of 2015.
"We have a lot of opportunities in front of us that we've talked about and we're also being selective with those opportunities," Szkutak said at the time. "We certainly have been in a heavy investment cycle."
Those few words signaled the change -- after reporting adjusted earnings per share of negative 52 cents in 2014, Amazon likely ended 2015 with EPS of $1.84.
While the company finally began reporting the cloud unit separately in 2015, helping further fuel the stock rally, Amazon is unlikely to add much clarity around one of its other critical growth engines, the Prime membership plan. In its typically obfuscatory style of disclosure, for example, Amazon announced in late December that 3 million people had signed up for Prime in one particular week last December, a one-time metric that doesn't help estimate the total size or rate of growth of the program.
Amazon has also said there are "tens of millions" of Prime members. The group is so important because the benefits they receive, including free shipping on purchases and access to a vast library of online video, prompt much greater engagement, loyalty and spending levels. U.S. Prime members spent $1,100 on average at Amazon versus $600 for non-members last year, according to an estimate from Consumer Intelligence Research Partners. The firm also estimates the program grew 35% last year to 54 million people.
Further growth at Prime, along with the continued commitment to show profits, will help Amazon's share price make further gains. But investors may have to discern the trends from some pretty ambiguous chatter on Thursday's call with analysts.