Amazon Q4 Earnings: earnings to contract despite strong revenue growth

When does Amazon (AMZN) report earnings?

Amazon will deliver results for Q4 after market on February 3, 2022.

Amazon earnings – what to expect

Analysts are expecting a year-on-year drop in Amazon earnings for Q4, with consensus estimates for the quarter at $3.88 per share. The drop comes despite forecasts for a strong increase in revenues for the quarter, which are expected to to have grown by 10% to around $138 billion, driven by strong sales during the holiday period and Black Friday. The drop in earnings comes amidst capacity constraints this quarter, along with disruptions caused by clogged supply chains that have raised costs and eroded Amazon’s margins. The outlook for the company will be important this quarter, as EPS growth trends lower. Although Amazon doesn’t provided earnings guidance, it does offer guidance on operating income. Given major capital expenditures, margin pressures, and possibly weaker revenue from slowing retail sales in the US, investors will likely be looking for signs from the company that these headwinds are easing and that the trend lower in earnings will indeed reverse in coming quarters - as analysts expect.

Amazon earnings – valuation, broker views and sentiment

Sentiment towards the stock from the broker community and IG clients remains broadly positive. Amongst 51 surveyed analysts, 24 rate the company a strong buy, another 25 a buy, and 2 a hold, with the average rating a buy. This also comes with an average analyst price target of $4111.7 – making current prices a considerable discount. That bullishness is also reflected amongst IG’s client based currently, with 96% of clients long the stock.

Amazon earnings – technical analysis

From a technical standpoint, price action does not look constructive for Amazon shares. After putting in a double top around $3750, the tumble in tech stocks amidst growing concerns of policy tightening from the US Federal Reserve has seen the company’s share price plunge. Momentum has rolled-over to the downside, with the weekly RSI falling close to technically oversold territory. Having broken support at $2880, the next key level of technical support looks to be around $US2480, which sits just above the stock’s 200-day MA. If price can rebound through previous support and now resistance at $2880, perhaps in the event of better than expected results, the next major level to watch on the upside is around $3150.

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