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Time to Buy Stock in Amazon as Q2 Earnings Approach

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In the busiest week of the Q2 earnings season markets will be awaiting quarterly results from Amazon (AMZN - Free Report)  on Thursday, August 1.

Furthermore, Amazon’s stock sports a Zacks Rank #2 (Buy) as now looks like an ideal time to invest in its e-commerce growth and diverse business operations.

Amazon’s Q2 Expectations

Supporting Amazon’s e-commerce dominance has been the company’s advertising services and cloud expansion through Amazon Web Services (AWS). Advertising services revenue for Q2 is projected to leap 22% to $13 billion with AWS revenue expected to spike 17% to $25.86 billion.

Notably, Amazon is still the largest cloud provider ahead of its Magnificent Seven peers Microsoft (MSFT - Free Report)  and Alphabet (GOOGL - Free Report) . Overall, Amazon’s Q2 sales are thought to have risen 10% to $148.63 billion versus $134.38 billion in the comparative quarter.

On the bottom line, Q2 EPS is expected to increase 63% to $1.03 compared to $0.63 per share a year ago. Plus, the Zacks ESP (Expected Surprise Prediction) indicates Amazon could surpass earnings expectations with the Most Accurate Estimate having Q2 EPS slated at $1.08 and 4% above the Zacks Consensus.

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Image Source: Zacks Investment Research

Amazon has surpassed bottom line expectations for six consecutive quarters posting a very impressive average earnings surprise of 48.17% in its last four quarterly reports.  

Zacks Investment Research
Image Source: Zacks Investment Research

Reasonable Valuation

With Amazon’s growth outpacing most of its big tech counterparts outside of Nvidia (NVDA - Free Report) , the tech giant’s valuation has become more reasonable as well. After trading at very stretched premiums in the past it's noteworthy that Amazon’s stock has a “B” Zacks Style Scores grade for Value.  

To that point, AMZN is currently trading near its cheapest P/E valuation with a forward earnings multiple of 39.7X. This is pleasantly below its five-year high of 161.3X and a 44% discount to the median of 71.8X.

Zacks Investment Research
Image Source: Zacks Investment Research

YTD Performance Comparison

Only trailing Nvidia and Meta Platform’s (META - Free Report)  price performance, Amazon’s stock is up +20% year to date to roughly match Alphabet while topping the rest of its Magnificent Seven peers and the broader indexes. 

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

Given its far more reasonable valuation and compelling growth, Amazon’s stock certainly looks poised for more upside if the e-commerce and cloud behemoth can indeed reach or exceed Q2 earnings expectations.

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