Amazon smashes earnings forecasts, causing stock to surge

A huge beat on Q2 earnings estimates from the Bezos behemoth has provided a bullish catalyst for tech stocks, which have been struggling of late.

Amazon blasts through estimates

The online shopping giant Amazon had been expected to report earnings per share of $1.46 according to Reuters, but breezed through that with EPS of $10.30. Revenue also beat forecasts, coming in at $88.9 billion versus expectations of $81.6 billion.

Amazon reported that it created over 175,000 new jobs since March, as it scrambled to respond to huge demand for its online services, both in its online shopping division and in its cloud computing arm, Amazon Web Services. This of course increased its cost base, and the firm spent more than $4 billion on incremental costs relating to Covid-19, repeating a trend from its Q1 results.

There was a hint of caution in the earnings report, as it said that guidance for the rest of the year was subject to considerable uncertainty, but overall this is a strong set of numbers that will re-energise the stock, and could also provide the bullish catalyst that the US indices have been looking for.

The positive news has been bolstered by beats on earnings for Facebook and Alphabet, adding to the impression that the tech sector is about to lead the broader market higher. Amazon stock rallied 4% in after-hours trading directly after the report, and clients can continue to trade Amazon through its IG’s all-sessions offering.

Amazon: technical analysis

Since May Amazon has moved in a gentle trend higher, having surged in March and April. The trend has been relentless, with only short-term weakness, but since mid-July we have seen a degree of hesitation set it. Two attempts to clear $3200 have run into difficulty, but losses have been confined to an area roughly defined by the 20-day simple moving average (orange line).

If we see a bullish crossover in stochastics in coming sessions then we may have seen yet another higher low as the stock continues its move into fresh record territory, targeting $3200 and higher. Alternately more sustained downside below $2900 brings the 50-day SMA, currently at $2780, into view.

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