{"id":1980,"date":"2023-10-19T06:27:06","date_gmt":"2023-10-19T06:27:06","guid":{"rendered":"https:\/\/connectwithfund.com\/investment\/amazons-upcoming-earnings-report-bullish-forecasts-and-catalysts-to-watch\/"},"modified":"2023-10-19T06:27:07","modified_gmt":"2023-10-19T06:27:07","slug":"amazons-upcoming-earnings-report-bullish-forecasts-and-catalysts-to-watch","status":"publish","type":"post","link":"https:\/\/connectwithfund.com\/?p=1980","title":{"rendered":"Amazon\u2019s Upcoming Earnings Report: Bullish Forecasts And Catalysts To Watch"},"content":{"rendered":"
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Remember when Amazon
\n AMZN
\n <\/fbs-ticker> was just considered an online bookstore? Few folks had the foresight to see how the company would eventually go on to dominate the online consumer goods marketplace, but the ones that did have been richly rewarded. Amazon\u2019s current business model is not as simple to grasp as it used to be, but it\u2019s still straightforward so that any savvy investor can come to understand how the company operates enough to invest in it. Amazon\u2019s \u201cbig tech\u201d reputation can be a daunting hill to overcome, but after reading this article, investors should be better prepared to develop their own thesis going into the company\u2019s earnings release this month. Let\u2019s dive in.<\/p>\n

Amazon Stock Key Considerations<\/h2>\n

Generally, Amazon\u2019s financials are what you could expect out of a blue-chip incumbent in its respective industry. Net earnings were negative in recent releases, which is uncharacteristic of a blue chip, but it\u2019s par for the course with Amazon just like the elevated valuation metrics it usually carries. However, there are at least a few key areas that investors will want to pay close attention to with this new set of financials. Remember to not only look at the literal numbers themselves, but also the notes that are attached to them in the official SEC filing. Here are a few metrics to examine once the release is out:<\/p>\n

Amazon Web Services (AWS) contributions<\/strong><\/h3>\n

AWS is one of the defining pillars of Amazon\u2019s operations. The success of Amazon\u2019s enterprise-level cloud platform is mainly driven by corporate spending drives rather than consumer-related activity, but broad macro factors like high interest rates can still play a factor in how companies negotiate their contracts with Amazon. Margins are much healthier in this segment compared to the other logistics-heavy segments, but investors should watch for any positive change between periods. Topline revenue growth is there in the first two quarters of 2023 (represented by a 14% increase from 2022), but operating expenses are also eating into a bigger chunk of the margin (24% versus 32% in 2022). A turnaround of this trend in the third quarter would be a bullish sign for both traders and longer-term investors.<\/p>\n

Other income (expense), net<\/strong><\/h3>\n

This number was impactful last year due to Amazon having to write down the value of its Rivian holdings to the tune of nearly $14 billion. The official 10-Q notes clarify the exact breakdown, but the lesson here is that investors should look to see if this P&L (profit and loss) line item has stabilized to a near-zero value in the third quarter and beyond.<\/p>\n

Purchases of property and equipment<\/strong><\/h3>\n

Amazon\u2019s recent below-average financials have been partially attributed to investment in the company\u2019s fulfillment infrastructure. Building out warehouses, managing routes and ensuring on-time delivery (among many other operational activities) doesn\u2019t come cheap, so investors should monitor this cash flow line item to see whether the company is going to continue spending heavily on structural improvements or eventually wind down these investments. Last quarter, Amazon spent approximately $11.4 billion on PP&E (property, plant and equipment), a 27% decrease from the previous year\u2019s total.<\/p>\n

Momentum<\/strong><\/h3>\n

While this isn\u2019t an official filing-related metric, investors will want to watch how this technical indicator changes as the earnings release date gets closer and as it passes. Amazon stock\u2019s current pricing is showing buy signals on most time frames (i.e. the stock is exhibiting bullish momentum), but investors will want to confirm broad market enthusiasm in the time following the release.<\/p>\n

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Amazon\u2019s Q2 2023 Earnings Results<\/h2>\n

Amazon\u2019s previous earnings for the second quarter of 2023 were well-received. The company beat on both EPS and revenue, a marked improvement relative to previous years. Investors immediately pushed the share price up, which is visibly observable when looking at Amazon\u2019s chart during that period. However, since then the share price has been somewhat stagnant, hovering above its August 3 price of $128.93 and going as far as $145 before walking back to around the $130 range. This suggests that traders still see Amazon as a reliable earnings play, and with as much volume as the company typically generates, this kind of post-earnings movement should be expected (especially on positive developments). For the third quarter, Amazon\u2019s management has guided for between $138 billion and $143 billion in revenue. This would be an average of 11% growth compared to 2022, which is a modest assumption and one that would be in-line with the quarter over quarter growth so far. The 40-plus Wall Street analysts who cover Amazon are currently calling for a consensus \u2018Buy\u2019 rating, likely due to the company\u2019s rapidly improving financials.<\/p>\n

When Does Amazon Release Its Next Earnings?<\/h2>\n

According to Amazon\u2019s website, its next earnings release is scheduled for October 26 after the market closes. The company will have a conference call at 5:30 ET. The majority of previous quarterly releases have been at 12:00 P.M. ET, which makes sense for a west coast company, although for the future, investors should note that the annual releases have happened at 11:00 A.M. ET. Amazon typically hosts their call as a webcast on the IR section of its website, although there are a few platforms where a transcript can be accessed after the call is finished.<\/p>\n

Catalysts And AMZN Stock Earnings Forecast<\/h2>\n

Judging by its current fundamentals, Amazon\u2019s trajectory looks like it will be more in line with the bull camp\u2019s expectations rather than the bear camp. New leadership through Andy Jassy (elevated from AWS head to Amazon\u2019s CEO), a cost-cutting program revolving around lowering headcount, and investment for improving the company\u2019s bread-and-butter delivery operations all seem to be paying off in 2023. Amazon\u2019s P\/E is currently 105 at the time of writing, although recall that this metric is only useful as long as the company has positive earnings. Investors wouldn\u2019t be wrong for adopting a bullish outlook, given this and other positive financial signs (like the company\u2019s expanding margins).<\/p>\n

However, if the overhang from major factors like geopolitical instability and economic uncertainty aren\u2019t overcome, Amazon\u2019s financials may falter again and its share price will languish alongside them. Legal woes could also bring down the stock, as Amazon recently received a major challenge from the FTC and several U.S. states related to alleged anticompetitive practices.<\/p>\n

Since the pre-pandemic era, right around 2019, Amazon\u2019s stock has established a support level near the $86 mark. For bears and investors looking to hedge, this would be the low point for the share price moving forward. For bulls, following the elevated levels that Amazon was trading during the height of the pandemic, it\u2019s now trading along the multi-year upward trendline that\u2019s been in place for the last decade. The peak of $182 during the summer of 2021 would be a plausible price target for the near future; based on the share price at the time of writing, investors would be looking at a 37.8% return if the share price continued climbing.<\/p>\n

Possible upside catalysts include:<\/p>\n