Amazon is set to report earnings after the Thursday market close. For the most part, I like the long-term growth dynamics of AWS and Amazon retail. The key theme to watch for is margins, as its broadly anticipated that the company will enter into a profit harvesting phase due to CAPEX trends. Now of course, if this does not materialize AMZN shareholders could be in a lot of trouble. RBC Capital Market released a note on Tuesday citing potential risks to estimates (they continue to reiterate $775 price target):Critical factors for Q4 Print: In addition to fundamental results and Q1 outlook, we believe the following are critical factors. 1) Gross margin trends– Consistent and material Y/Y GM expansion has been one of the most important fundamental factors for the stock’s performance, in our view. This trend likely needs to continue for shares to move higher, and we believe it will. We estimate GMs of 32.5%, +300bps Y/Y; 2) Overall Operating margin trends– We believe Amazon’s heavy investments in international markets will weigh on profitability. We estimate 4.5% margins in Q4, +100 bps from Q4:14. Amazon Reports Q4:15 on January 28th– We expect $36B in revenue, $1.63B in CSOI, and GAAP EPS of $1.22. Our revenue est. is in-line with consensus, but above the midpoint of guidance, while our GAAP EPS est. is lower than consensus of $1.58. We would note that Amazon has not posted topline results above guidance/Street in Q4 since 2009. Okay, so if you need some help deciphering the comments from that note. Essentially, RBC is mentioning that revenues may not surprise or report at the high-end of the range. However, going into the quarter a lot of third-party research indicated neutral impact to sales (perhaps ChannelAdvisor and comScore figures weren't a needle mover). Furthermore, the improvement to profitability is subjective because the company could always ramp some spending on the OpEx line, which has happened in the past. Of course, I’m with the consensus here on the margin expectations as I was blogging about the topic of ramping profitability for quite a while now. Of course, if this does not materialize we can kiss goodbye any possibility of the stock reaching $800 per share. Now, I’m a lot more conservative than the consensus on the valuation, but with Amazon you just never know. People will find just about any excuse to buy the company even if margins are awful or sales results missed estimates. That being the case, I continue to reiterate my buy recommendation. I’m going to offer my price target after the company announces earnings.