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Should You Buy Amazon ETFs Ahead of Q2 Earnings?

Sweta Killa

Amazon AMZN is set to release second-quarter 2019 results on Jul 25 after market close. Being a market leader in online 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 gained 4.3% over the past three months, easily outperforming the industry’s average growth of 0.4%. The outperformance is likely to continue as Amazon is poised to beat the Zacks Consensus Estimate for earnings and has attractive fundamentals.



Inside Our Methodology

Amazon has a Zacks Rank #3 (Hold) and an Earnings ESP of +15.56%, indicating reasonable chances of beating estimates this quarter. Betting on stocks that have a combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 usually leads to profits. Our research shows that the chance of a positive earnings surprise is as high as 70% for stocks with this combination. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The stock has seen positive earnings estimate revision of a penny over the past 30 days for the second quarter. The Zacks Consensus Estimate indicates increase of 4.34% from the year-ago reported figure. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a pretty good indicator for the stock (read: What's In Store for FAANG ETFs in Q2 Earnings?).

Amazon’s earnings surprise history is also impressive, with a positive earnings surprise of 60.25% on average for the last four quarters. Additionally, the company is expected to report revenue growth of 18.2%. The stock has a solid Growth Score of B and falls under a top-ranked Zacks industry (top 24%).

According to analysts polled by Zacks, Amazon has an average target price of $2,204.44, with nearly 96% of the analysts giving a Strong Buy or a Buy rating ahead of the company’s earnings.

Amazon.com, Inc. Price, Consensus and EPS Surprise

Amazon.com, Inc. Price, Consensus and EPS Surprise

Amazon.com, Inc. price-consensus-eps-surprise-chart | Amazon.com, Inc. Quote


What’s Hot?

The online e-commerce behemoth once again smashed records, with its annual Prime Day 2019 sales surpassing last year’s combined Black Friday and Cyber Monday sales. A record number of Prime members shopped for more than 175 million products across 18 countries during the event, which extended for 48 hours this year compared with 36 hours in 2018 and 30 hours in 2017. Amazon claims this year was the "fastest Prime Day ever," meaning that it shipped more items through one- and same-day shipping. It sold over 100,000 laptops, 200,000 televisions, 300,000 headphones, 350,000 luxury beauty products and more than 1 million toys (read: Amazon Prime Day Smashes Record: 5 ETF Deals).

In its first-quarter earnings release, the company issued downbeat revenue guidance for the second quarter. It estimated revenues to grow 13-20% to $59.5-$63.5 billion. Also, Amazon’s new initiative to offer one-day delivery of most goods for its Prime members instead of two will likely weigh on operating profit in the second quarter.

ETFs to Buy

Given this, ETFs with the highest allocation to this online behemoth will be in focus ahead of its earnings announcement. These funds are likely to gain if Amazon delivers an earnings beat. We have highlighted seven ETFs that have AMZN as the top firm in their portfolio:

Fidelity MSCI Consumer Discretionary Index ETF FDIS: It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. Amazon makes up for 25.9% in the fund’s basket.

ProShares Online Retail ETF ONLN: Amazon makes up for 23.7% in the fund’s basket.   

Consumer Discretionary Select Sector SPDR Fund XLY: The fund carries a Zacks ETF Rank #2 with a Medium risk outlook. Amazon accounts for 23.6% share (read: ETF Asset Flow of Last Week: S&P 500 Tops).

Vanguard Consumer Discretionary ETF VCR: This ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Amazon has 22.4% allocation.

VanEck Vectors Retail ETF RTH: The fund has a Zacks ETF Rank #2 with a Medium risk outlook. Amazon makes up for 20.1% of the assets (read: Retail ETF Hits New 52-Week High).

iShares Global Consumer Discretionary ETF RXI: AMZN accounts for 18.9% share in the basket

iShares U.S. Consumer Services ETF IYC: It carries a Zacks ETF Rank #2 with a Medium risk outlook. Here, AMZN takes 10.3% share (read: Tap Disney's Roaring Box Office Success With These ETFs).

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