Amazon stock price: what to expect ahead of Q2 earnings

When does Amazon publish its earnings?

Amazon is expected to publish its second-quarter (Q2) earnings on 30 July, although the date has not been confirmed.

Amazon earnings: what does Wall Street expect?

The Jeff Bezos behemoth is expected to report adjusted earnings per share (EPS) of $5.39, down 35% over the year, but revenue of $80 billion, an increase of 27%. The group has beaten estimates on both of these metrics in six of its last eight earnings reports.

In Q1 the firm was able to report that revenues had risen but this more optimistic tone was outweighed by substantial increases in costs as the company took steps to implement the necessary protection for its workforce against the spread of coronavirus. While of course a vital step, this did hit profitability, and the trend is likely to continue in these results.

Amazon is still firmly in the ‘growth stock’ category. Its varied income streams, not the least of which is its cloud-computing arm, will continue to grow, with no sign that the titan is losing its appeal or dominant market share. And with lockdowns likely to remain a feature of the economic landscape for some time people will continue to find the e-commerce pioneer a vital part of everyday life.

How to trade Amazon’s earnings

On a valuation basis, the stock has become substantially more expensive over the past year. It now trades at 143 times earnings, from ‘just’ 82 a year ago. But with its proven track record of growth it is unlikely that many investors will be deterred by this.

In regard to broker ratings, of 57 analysts covering the stock, 52 have ‘buy’ ratings, with four ‘holds’ and one lone ‘sell’ rating. The target price of $2921 is around $87 below the current price, or 2.9% lower.

On a technical basis, Amazon has seen a noticeable increase in volatility. The 14-day average true range (ATR), a measure of volatility, has risen to its highest level, at 104, which points to an average move of 3.5%. This higher volatility indicates that positions on Amazon may need to be smaller, with wider stop placement, than was the case in early June when the ATR figure was around 60, pointing towards an average daily move of 2.2%.

Amazon stock: technical analysis

Like many big tech stocks, Amazon has enjoyed an impressive rally from the March lows. And until 10 July, it barely saw any long-lasting weakness. While the stock has dropped back below $3000, there is plenty of opportunity for downside support, with rising trendline support from the May lows coming in around $2800.

Below this the stock could also see support at the 50-day simple moving average (SMA) at $2650. For the time being, the stock has seen its daily moving average convergence/divergence​ MACD roll over and give a bearish crossover for the first time since early May, while daily stochastics continue to decline too. This points towards continued weakness ahead of earnings in the near term, but the longer-term trend is still firmly up.

Amazon still a strong performer

Impressive cash generation and a robust chart outlook make Amazon one to watch on both fundamental and technical grounds. It has not proven wise to be bearish on the company for anything but short periods, and even some post-earnings weakness is still likely to be a buying opportunity in the long run.