CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Amazon stock price: what to expect ahead of Q2 earnings

There has been no stopping Amazon stock over the past quarter, and Q2 results are likely to confirm the bullish outlook.

When does Amazon publish its earnings?

Amazon is expected to publish its second-quarter (Q2) earnings on 30 July, although the date has not been confirmed.

Amazon earnings: what does Wall Street expect?

The Jeff Bezos behemoth is expected to report adjusted earnings per share (EPS) of $5.39, down 35% over the year, but revenue of $80 billion, an increase of 27%. The group has beaten estimates on both of these metrics in six of its last eight earnings reports.

In Q1 the firm was able to report that revenues had risen but this more optimistic tone was outweighed by substantial increases in costs as the company took steps to implement the necessary protection for its workforce against the spread of coronavirus. While of course a vital step, this did hit profitability, and the trend is likely to continue in these results.

Amazon is still firmly in the ‘growth stock’ category. Its varied income streams, not the least of which is its cloud-computing arm, will continue to grow, with no sign that the titan is losing its appeal or dominant market share. And with lockdowns likely to remain a feature of the economic landscape for some time people will continue to find the e-commerce pioneer a vital part of everyday life.

How to trade Amazon’s earnings

On a valuation basis, the stock has become substantially more expensive over the past year. It now trades at 143 times earnings, from ‘just’ 82 a year ago. But with its proven track record of growth it is unlikely that many investors will be deterred by this.

In regard to broker ratings, of 57 analysts covering the stock, 52 have ‘buy’ ratings, with four ‘holds’ and one lone ‘sell’ rating. The target price of $2921 is around $87 below the current price, or 2.9% lower.

On a technical basis, Amazon has seen a noticeable increase in volatility. The 14-day average true range (ATR), a measure of volatility, has risen to its highest level, at 104, which points to an average move of 3.5%. This higher volatility indicates that positions on Amazon may need to be smaller, with wider stop placement, than was the case in early June when the ATR figure was around 60, pointing towards an average daily move of 2.2%.

Amazon stock: technical analysis

Like many big tech stocks, Amazon has enjoyed an impressive rally from the March lows. And until 10 July, it barely saw any long-lasting weakness. While the stock has dropped back below $3000, there is plenty of opportunity for downside support, with rising trendline support from the May lows coming in around $2800.

Below this the stock could also see support at the 50-day simple moving average (SMA) at $2650. For the time being, the stock has seen its daily moving average convergence/divergence​ MACD roll over and give a bearish crossover for the first time since early May, while daily stochastics continue to decline too. This points towards continued weakness ahead of earnings in the near term, but the longer-term trend is still firmly up.

Amazon still a strong performer

Impressive cash generation and a robust chart outlook make Amazon one to watch on both fundamental and technical grounds. It has not proven wise to be bearish on the company for anything but short periods, and even some post-earnings weakness is still likely to be a buying opportunity in the long run.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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