Amazon Stuck In Neutral Ahead Of EarningsThe e-commerce juggernaut may be carving a head and shoulders topping pattern.
Amazon.Com Inc. (AMZN) reports Q3 2020 earnings after Thursday’s U.S. closing bell, with Wall Street analysts expecting a profit of $7.17 per-share on $92.5 billion in revenue. If met, that would mark a 65% earnings-per-share (EPS) increase compared to the same quarter in 2019, highlighting huge market share gains as a result of the COVID-19 pandemic. The stock rallied 3.7% after a blowout Q2 report at the end of July but hasn’t added a penny since that time.
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Growing Political Headwinds
The next presidential administration could signal growing risk for the $1.6 trillion mega-cap, regardless of who wins the election. CEO Jeff Bezos also owns the Washington Post, which President Trump has repeatedly accused of disseminating ‘fake news’. A Democratic presidency could be even tougher on Amazon, following through on accusations of anti-competitive and monopolistic behavior that’s forced tens of thousands of small businesses to shut down.
The Benchmark Company analyst Daniel Kurnos raised their target to $3,800 earlier this month, stating “we expect Amazon to be a material share gainer this holiday period, while also spreading out and front running some early holiday demand to avoid shipping shortages and incrementally costly last mile delivery methods. We get that timing is challenging but see the recent pullback as an excellent entry point.”
Wall Street And Technical Outlook
Wall Street consensus has been one-sided throughout 2020 despite historic share gains, with a ‘Strong Buy’ rating based upon 37 ‘Buy’ recommendations. No analysts covering the retailer are posting a ‘Hold’ or ‘Sell’ recommendations. Price targets currently range from a low of $3,400 to a Street-high $4,500 while the stock is now trading about $150 below the low target. This unanimity of opinion looks like a warning sign, given depressed price action and lack of Q3 upside.
Amazon broke out above the first quarter high at 2,190 in April, posted an all-time high at 3,552 in September, and failed the breakout above 3,350 a few days later. Accumulation topped out in July while price action since June has carved the outline of a potential head and shoulders topping pattern. The July and September lows define the possible neckline, with a breakdown exposing a multi-week correction that could reach breakout support near 2,200.
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