Trading Analysis: Amazon Earnings Preview

By Colin Cieszynski, CFA, CMT, Chief Market Strategist and Jasper Lawler, Market Analyst, CMC Markets The report on Amazon earnings is expected to continue an ongoing theme for the company as visionary founder and CEO Jeff Bezos focuses more on expansion that profits. Revenues have been expanding rapidly but so has expenditure resulting in negative income growth. With all the growth potential stemming from its massive R&D spend; shares may just need the growth in expenses to slow down to spark a recovery. Earnings Expectations Amazon is expected to report adjusted EPS of $0.93 for the quarter down 2.6% from a year ago, on sales of $29.6B up 16% from last year. Amazon suggested in late December it had a strong holiday season, we’ll see pretty soon of the numbers can live up to the hype. Last quarter, Amazon lost ($0.42) per share adjusted way below the ($0.02) the street had expected. Sales last quarter of $20.5B were short of the $20.8B the street had expected. Chart Analysis The arrival of Alibaba as a public company has shaken up trading in the ecommerce sector. Through most of the last nine months, eBay and Amazon have been trending sideways, changing leadership back and forth. Alibaba outperformed both of them in soaring off its debut but has been steadily giving back ground since November. Since March, Amazon had been steadily trending downward in a channel of lower highs and lower lows. Recently the shares rallied up from $285 and appear to have completed a double bottom but have dropped back toward $300 after failing to overcome resistance at their 200-day average near $320. Over the last few days, both the price and the RSI have rolled over suggesting expectations for the quarter are running pretty low raising the potential for a positive surprise.