Amazon shares spiked Thursday, up 6.7%, ahead of its third-quarter earnings report, which was due after the closing bell. The rally came amid broader strength in the tech sector, one day after Wall Street wiped out its gains for the year.
Analysts surveyed by Bloomberg expect Amazon to report adjusted earnings of $5.62 a share on revenue of $57.05 billion. They will be paying close attention to how the company's recent wage hike will impact its balance sheet.
The tech giant announced earlier this month that it would raise the minimum wage for US and UK employees starting in November. Amazon also plans to phase out its restricted stock unit program, citing hourly employees preferred the “predictability and immediacy of cash to RSUs,” or restricted stock units.
Jefferies says the incremental compensation cost is affordable for Amazon because the e-commerce giant "has several high-growth, high-margin businesses that allow it to pull investments from other areas to accommodate a wage hike" and that the pay increase could bring benefits in improving efficiency and placating political pressure, which should "offset a good portion of the incremental cost."
But Nomura Instinet said the wage hike comes at a cost for employees because Amazon is eliminating restricted stock options and monthly incentive bonuses for hourly workers. And so, if calculating stock and incentive benefits, these employees will actually "lose out" after the new wage change.
In a statement sent to Business Insider, Amazon said: “The significant increase in hourly cash wages effective November 1 more than compensates for the phase out of incentive pay and future RSU grants.”
Amazon was up 50% this year.
Join the conversation about this story »
NOW WATCH: How smart contracts will work
Credit: Alex Wong/Getty Images