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Amazon’s Revenue Growth to Slow in 1Q15

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Amazon’s revenue growth to slow in 1Q15

Amazon (AMZN) is expected to announce its 1Q15 earnings on April 23 after the market closes. According to Amazon’s own outlook for 1Q15, it’s expecting YoY (year-over-year) revenue growth of 6%–16% in 1Q15. At the midpoint, Amazon’s revenue could show only 11% growth in the first quarter.

As the chart below shows, Amazon’s year-over-year revenue growth has continued to slow in the last few quarters. This could be a point of concern for Amazon.

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Currency headwinds are a factor in Amazon’s weak revenue growth

Amazon believes its weaker revenue growth stems from the US dollar’s appreciation against international currencies. Amazon derived 62% of its revenue from North America and 38% of its revenue from international markets.

Amazon expects a 460 basis point (4.6%) impact on its revenue from the currency in 1Q15, which is even greater than 4Q14. According to Amazon, the impact of currency on its revenue in 4Q14 meant that its revenue growth could have been 18% instead of 15%.

The euro has fallen nearly 20% against the US dollar since last summer. The stronger dollar (UUP) continues to hurt the performance of large-cap stocks. Microsoft (MSFT), Apple (AAPL), and Facebook (FB) all have announced an expected 4%–5% hit to their revenues in 1Q15.

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