Amazon share price: what to expect from Q4 results

When is Amazon’s earnings date?

Amazon, the Nasdaq-listed, world-leading, e-commerce business will report its fourth quarter (Q4) earnings for 2018 on Thursday 31 January 2019.

Amazon Q4 earnings: what does Wall Street expect?

In terms of the upcoming results, the group has given the following guidance as to what we can expect from the Q4 2018 results:

• Net sales are expected to be between $66.5 billion and $72.5 billion, or to grow between 10% and 20% compared with Q4 2017. This guidance anticipates an unfavorable impact of approximately 80 basis points from foreign exchange rates
• Operating income is expected to be between $2.1 billion and $3.6 billion, compared with $2.1 billion in Q4 2017

Amazon has also indicated that in the holiday season, customers worldwide had produced a record breaking number of orders. In the US, over one billion orders were received by Amazon Prime members. The stronger festive season is expectant of net sales to be realised towards the upper end of the 10% to 20% guided range.

Bloomberg research on Amazon arrives at the following consensus estimates for the Q4 2018 results:

• Earnings per share (on an adjusted basis) $7.79
• Earnings per share (GAAP+) $5.59
• Revenue $71.92 billion
• Operating profit $3.64 billion

How to trade Amazon’s Q4 results

Traders and investors alike expressed disappointment in the group’s last set of results, particularly from Amazon’s outlook for Q4 operating income. The lower end of the operating income guidance if realised, at $2.1 billion, would equate to 0% growth year on year.

The short-term reaction to the Amazon share price, following the results’ release, is likely to be impacted by what end of the $2.1 billion to $3.6 billion range operating income is realised, as well as from the guidance given for the next quarter (Q1 2019).

Amazon’s cloud services business has been a key growth driver for the group, adding to the bottom line with its high profit margins. Traders will be looking for the growth momentum in group’s cloud services business to maintain operating margins within the broader business.

Both retail traders and longer-term analyst views suggest keeping to the buy side on Amazon share price.

Broker ratings

A Thomson Reuters’ poll of 48 analysts maintain a long-term average rating of buy for Amazon as of 28 January 2019, with 24 of these analysts recommending a strong buy, 21 recommending a buy, two hold and one sell recommendation on the stock.

Client sentiment

From a retail trader perspective, as of 28 January 2019, 86% of IG clients with open positions on Amazon expect the price to rise over the near term, while 14% of IG Clients with open positions expect the Amazon price to fall.

Amazon share price: technical analysis

The Amazon chart suggests that the short to medium-term price trends for the company may be reversing from down to up. This is evidenced by the 20-day simple moving average (SMA), which is the red line, crossing above the 50-day SMA (green line), highlighted with the blue arrow on our chart.

Technical analysis suggests a long bias to Amazon share price

The crossover would suggest keeping a long bias to trades for those wanting to trade in line with the short to medium-term trends.

Conservative traders might prefer to wait for the price to break above the $1705 resistance level before targeting a move towards the $1790 and $1850 levels respectively. A close below the near-term low at $1595 would consider the bullish technical indications to have failed.

What to expect from Amazon’s Q4 results

Amazon.com remains e-commerce giant having been amongst one of the first companies globally to breach the $1 trillion mark in terms of market size (although has since moved to a market capitalisation of around $815 trillion). Being one of largest companies in the world, markets will pay keen attention to the Q4 2018 results.

In summary:

• A strong holiday season is expected to push net sales closer to the 20% quarter on year growth target set by the group
• Operating income for the reporting period which are nearer to the $2.1 billion level is likely to disappoint markets
• Operating income closer to (or above) the $3.6 billion mark is likely to impress markets
• Growth momentum in the Cloud services expected to have continued in Q4 2018
• Strong operating margins in the Cloud services business expected to maintain group margins
• A Thomson Reuters' poll of 48 analysts maintain a long-term average rating of buy for Amazon (as of 28 January 2018)
• 86% of IG clients with open positions on Amazon expect the price to rise (as of 28 January 2019)
• A bullish moving average crossover (in technical analysis terms) suggests the short to medium-term trends for Amazon to be up