Can Amazon earnings extend 2015 gains?

Implementation of new products at Amazon show it is a market leader, yet this could damage profitability in the short term.

A person walking on an Amazon logo
Source: Bloomberg

Amazon is both a market leader and a market changer, operating on the frontline of e-commerce. This week’s announcement that it will be expanding into the travel sector comes hot off the heels of possible drone deliveries and its new cloud-based service; Amazon Web Services (AWS).

Given the predicted rise of cloud reliance and expansion, there is no doubt AWS could produce a reliable revenue stream down the line. However, with the implementation of a new product comes costs, and Thursday’s earnings release could be negatively impacted as a result.

Since the last earnings release, the stock has jumped approximately 32%, taking back much of the ground lost throughout what was a disappointing 2014 for Amazon investors. Given the long-term bull-market in this stock, this return to form is no surprise and Thursday could see those previous highs of $413 reached once more should earnings come in above estimates.

Markets are expecting an earnings per share of 63 cents, representing a fall of 30% year-on-year.

From a technical outlook, this week’s attempt to move above the $390 resistance is crucial to determining whether we can continue to shift towards that $413 high. A daily close above $390 would then bring a scenario where we would be looking out for a new support to be exhibited at that level to gauge confidence of another spike higher.

The strength of the move higher in January, coupled with the shallow 23.6% retracement seen over the past two months gives me confidence that there is more to come for the Amazon share price, and therefore I do expect us to see a daily close above $390 for the bullish signal I’m looking for. Following which, the $413 high established in January 2014 would represent the next major resistance point.

Denna information har sammanställts av IG, ett handelsnamn för IG Markets Limited. Utöver friskrivningen nedan innehåller materialet på denna sida inte ett fastställande av våra handelspriser, eller ett erbjudande om en transaktion i ett finansiellt instrument. IG accepterar inget ansvar för eventuella åtgärder som görs eller inte görs baserat på detta material eller för de följder detta kan få. Inga garantier ges för riktigheten eller fullständigheten av denna information. Någon person som agerar på informationen gör det således på egen risk. Materialet tar inte hänsyn till specifika placeringsmål, ekonomiska situationer och behov av någon specifik person som får ta del av detta. Det har inte upprättats i enlighet med rättsliga krav som ställs för att främja oberoende investeringsanalyser utan skall betraktas som marknadsföringsmaterial. 

Artiklar av våra analytiker