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minions amazonAmazon is set to report second-quarter earnings Thursday, and based on its recent stock performance, investors are expecting impressive results from the Seattle retailer.

Last week, Amazon’s shares jumped 8.9 percent, which is a drop in the bucket compared to its performance over the past year, with shares surging more than 50 percent. In January, it started off trading at just under $300 a share, and today, they are at a bountiful 486.60 apiece.

Amazon CEO Jeff Bezos also backs the Blue Origin space venture.
Amazon Founder and CEO Jeff Bezos

Tomorrow, Wall Street analysts are expecting Amazon to report a loss of 14 cents on revenues of $22.4 billion, according to Thomson Reuters. In the same period a year earlier, the company reported a loss of 27 cents on revenues of $19.3 billion. The company’s own targets peg second quarter revenues in the range of $20.6 billion to $22.8 billion.

[Note: Numbers corrected since original post.]

Analysts are also bullish on the company’s prospects. This week, Wedbush analyst Michael Pachter upgraded its rating on Amazon to “outperform” from “neutral” and increased its price target to $575 from $435.

“We expect some upside to consensus revenue estimates from growth in Prime revenues driven by additional media options, same-day fulfillment options, higher average Prime pricing, and continued strong growth in AWS revenue during the quarter,” he said. “We expect a loss of $0.13 in Q2 compared with consensus for a loss of $0.16, driven by reinvestment.”

But to say for sure that Amazon will impress is setting up the company for disappointment. Amazon is famous for investing aggressively when it has the cash to do so, and while some investors agree with the tactic, others would like to see an occasional payout.

That said, these critics may not be getting as much attention as Amazon gains momentum on multiple fronts, particularly its $99 annual membership program, Amazon Prime, which offers free shipping perks and access to free streaming media, and its cloud-computing business called Amazon Web Services (AWS).

Last week, UBS’s Eric Sheridan raised his rating to Buy from Neutral, and hiked his price target to $550 from $450. Sheridan called Amazon Prime a “flywheel” because of its compounding effects. First, it drives higher third-party sales on its marketplace, which in turn creates demand for its fulfillment operations, and finally that leads to higher merchandise sales.

primedayThe most recent event that got shareholders excited was Prime Day on July 15, which offered “Black Friday” shopping event to celebrate its 20th Anniversary. Customers were required to be members of Amazon Prime to receive discounts.

And, while some were unhappy with the selection of products for sale, or how fast they sold out, Amazon easily cleared out masses of unsold inventory. In the final tally, Amazon said it sold more units on Prime Day than its biggest Black Friday sale ever, as customers ordered a whopping 34.4 million items at a clip of 398 per second. Prime Day won’t be a part of tomorrow’s results since it fell outside the quarter.

For the first time last quarter, Amazon revealed the financial performance of its AWS division, which offers investors more transparency into the business, but could also open itself up to more criticism. Last quarter, Amazon said AWS earned a profit of $265 million, up from $245 million last year, and that in the last 12 months, AWS pulled in revenues of $5.2 billion.

But the catch is that not all bets work out as handsomely as Prime and AWS.

“Admittedly, some of the company’s capital decisions haven’t yielded strong returns (the Fire Phone, in particular),” writes one Morningstar analyst. “However, based on the strength of its network effect, we remain optimistic that Amazon can exceed 4.5% operating margins by 2019, driven by Amazon Prime memberships and fee increases, monetization of Amazon Web Services, fulfillment center scale (“getting closer to the consumer”), and third-party sales.”

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