Will Amazon’s Unit Growth Bottom Out in Q2?

There’s not a whole lot that Wall Street dislikes right now about Amazon, which is heading into its second-quarter earnings report today after markets close. Investors have pushed the online retailer’s stock price to record heights in recent weeks – more than $309 a share, and a market cap of $140 billion at one point – before backing off slightly to see Amazon close out Wednesday’s after-hours trading at about $300 a share.

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Despite the good vibes, there are problem areas. The company’s year-over-year growth of units sold has been decelerating, for example, which could be worrisome if it continues.

J.P. Morgan’s Doug Anmuth wrote in a research note that he is expecting some stabilization in the decelerating trend, but noted that, “we … believe sub-30% would be concerning to investors.” The launch of the Kindle in some giant new markets, such as India and China, could put the trend of deceleration to an end in the second half of the year.

Wall Street will also be keeping a close eye on the company’s international business, especially after eBay cited macroeconomic softness in Korea and parts of Europe when it reported earnings last week.

Investors will also likely look for some commentary on the same-day and next-day AmazonFresh grocery delivery business, which, after five-plus years of experimentation solely in Seattle, recently started serving the Los Angeles area. If Amazon can figure out how to at least break even on that resource-intensive business, it will likely then load up the delivery vehicles with higher-margin, higher-cost products.

But it will be a costly build-out, and could impact margins negatively in the short term. Similarly, fulfillment-center expansion and price cuts on AWS offerings could also drag down margins.

Amazon is forecasting revenue of $14.5 billion to $16.2 billion, with analysts expecting the company to register earnings per share of four cents to six cents on $15.7 billion in revenue.