Amazon Earnings Preview: 6.8% Stock Price Move Expected
Amazon Earnings Preview: 6.8% Stock Price Move Expected
By:Mike Butler
- Amazon is set to report earnings on Oct. 26 at 3 p.m. CDT.
- The tech giant has had massive earnings growth this year, beating EPS estimates by 44% and 89% in the last two quarters, respectively.
- Quarterly earnings are expected to come in at an EPS of $0.60 on $141.56 billion in revenue.
- The focal points for this quarter will be e-commerce sales growth, and ad sales.
Amazon (AMZN) is set to report quarterly earnings this week on Thursday, Oct. 26 with an expectation that revenue will increase and earnings per share (EPS) will decrease.
Last quarter, the company was expected to report EPS of $0.34 on $131.34 billion in revenue, and it reported a staggering EPS of $0.65 on $134.38 billion in revenue. After almost doubling the EPS figure that was expected, the market is now expecting a similar EPS print this time around.
Amazon stock has had a strong 2023 so far, opening the year at $85.46, and currently sitting at $123.40—up almost 45% on the year so far. The household-name tech stock reached a 2023 stock price high of $145.86 on Sept. 14. Amazon Web Services (AWS) is the largest public cloud service out there, and Amazon will look to lean on AWS growth this quarter.
Alphabet (GOOGL)—Google's parent company—just reported earnings and one of its misses was in the cloud revenue department—could this mean that AWS is taking more of the lion's share? We'll find out on Thursday after the close.
Amazon's ad sales are right up there with Alphabet and Meta (META), so it will be interesting to see how it fared this quarter. One of Amazon's fastest-growing business sectors. Alphabet beat ad-sales estimates by almost $1 billion this quarter and Amazon will look to report similar success.
One of the major focal points for Amazon's quarterly earnings announcement will be how it has adjusted and reduced costs in this inflationary environment—with cash flows slowing as consumers pinch pennies and prepare for some potential economic turbulence.
The stock's expected move for this week based on current implied volatility is +-$8.63. which is about 6.8% of the current stock price. This week's expected move is about half of the expected move through the January 2024 options cycle, so the market is placing a pretty heavy weight on this earnings announcement.
Bullish on Amazon earnings
Amazon has had a pretty amazing turnaround when it comes to net income, as shown in the tastytrade research tab above. Just a few quarters ago it posted a net loss of $2 billion. And in the last quarter, it posted a net income of $6.8 billion. Compound that with a competitor posting a strong ad sales report just a few days prior to Amazon's earnings announcement, and it may seem logical that the retailer could post another EPS and/or revenue beat. If that's the case, and the market likes what it sees, we may see Amazon stock rally.
Bearish on Amazon earnings
Amazon's sharp growth spurt has resulted in an EPS estimate that is almost double what it was last quarter. This means that. if the e-commerce giant doesn't continue these strong numbers, it could easily miss EPS and/or revenue expectations and the stock could fall.
More earnings pressure can sometimes mean a mediocre report could cause a stock price to drop. We saw with Alphabet after its earnings announcement, where it beat EPS and revenue estimates pretty easily, but the stock still dropped almost 5% the next day.
Tune in to Options Trading Concepts Live on Thursday, Oct. 26 at 11 a.m. CST for a full options strategy breakdown ahead of Amazon earnings.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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