AMZN Pre-earnings Analysis
Chart done on hourly timeframe. Amazon investors are finally seemingly excited about the stock again as it attempts to push higher into its 52 week highs, but compared to the rest of tech stocks, the company is lagging behind. Amazon’s inability to move to all time highs like many other tech stocks could be attributed to their expensive price to earnings ratio. Looking back at their earnings since early 2022, we see their net income has always struggled, but it improved in recent quarters thanks to their AWS cloud revenue. Q1 of 2022 reflected a loss of $3.84B, but since then, Amazon has managed to grow into profitable territory, reporting a positive $9.88B in net income last quarter. This improvement has helped adjust their price to earnings ratio, but it is still trading at a 83 multiple, about 4-6 times higher than the “healthy” range. There are two ways to correct this, either the stock’s price comes down, or their profitability goes up, investors are betting on the latter.
From advertising growth to AWS, analysts are optimistic about Amazon’s earnings. Trends point to a healthy quarter for the company, especially after the holiday season.
Option chain analysis:
Amazon’s option chain for the week expiring on February 2nd is currently reflecting an implied volatility reading of 76%, which translates to about a $10 move. That means if Amazon meets or beats earnings, then we expect it to end the week around $170.00. However if they miss earnings, the new expect a downside move to $150.00.