Could Amazon Earnings Post New Record Highs?

Amazon’s revenue stream is impressive: over 100 million US homes have a Prime membership for retail deals and delivery perks, while the increase of Amazon’s pharmaceutical offerings pushed logistics higher. Meanwhile, cloud, third-party seller services and e-commerce businesses are growing, as TV streaming business has expanded in order to take over Netflix, Apple etc.

The Amazon Web Services (AWS), the retail results and margins will be in the spotlight when Amazon reports, especially after AWS boosted in the first quarter the revenue of the company up to 41% for 2018, i.e. extra income up to more than $2 Billion from last year. The introduction of Amazon Web Services (AWS) three years ago held Amazon’s share price to record highs for years as it helped Amazon to expand its business further. The AWS provides on-demand cloud computing platforms to individuals, companies and governments, on a metered pay-as-you-go basis.

The third-party sales should also assist in holding profits high as nowadays more than 50% of Amazon’s total unit sales come from third-party sellers.

Despite the fact that Amazon posted a $59.7 billion sales growth (17% rise y/y) in the first quarter of the year (that’s almost one billion per month), its share price declined by nearly 14% in May due to the general weakness in the tech sector. The escalating trade war between the US and China drove tech indices lower in May. After that tumble though AMZN recovered all the losses and is currently up by over 30% in 2019, slightly below record highs seen last year.

Despite impressive performance so far in 2019, today it will be also interesting to see whether Amazon’s huge spending ($800 million) to upgrade Amazon Prime’s free delivery benefit from two days to one day, will actually affect the second-quarter 2019 profits.

Q2 Outlook

The consensus recommendation for the company is “Strong buy”, which matches the majority consensus recommendation for the Software peer group (47/48) based on Refinitiv. Amazon is expected to post $5.29 earnings per share and revenue of $62.57 billion according to Zacks Consensus Estimates, which reflect an increase of around 18.3% on revenue on a year-over-year basis.

Such a result would top last quarter’s expansion, however, they will highlight a slowdown on Amazon’s growth in comparison with 2017 and 2018 growth.

Technical Analysis

If the giant’s earnings post another positive growth report, then the rise by 23% seen since $1,671 low in June could extend further and push Amazon’s stock price northwards to the retest of 2018 high and to new record highs. You may trade Amazon Share CFDs with HotForex.

Taking a technical look at Amazon’s stock, the increase of the daily and weekly RSI and the spike of MACD lines above the signal line, they are pointing to a bullish medium-term picture. In the medium-term, the asset holds above all MAs (20-, 50- and 200-week), while in the near term it seems to be well supported by 20-day SMA the past 6 weeks.

The price movement suggests a further bullish bias towards. Therefore, the extension higher for Amazon price, after strong earnings outcome, could find Resistance at 2050.00 and 2158.73 (127. Fibonacci extension). Immediate Support could be seen at the $1,915.00 – $1,950.00 area, which is between last week’s low and the confluence of the 50-day EMA and the 61.8% fib. extension set since March rebound.

On the flipside, a break below this area, could be crucial as it will open the doors towards June’s low, in $1,600.00 area.

Andria Pichidi, Market Analyst at HotForex

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