Michael Fowlkes' Analyst Insights
InvestorsObserver
Options and ETF Analyst Writer
Michael Fowlkes
Author Bio
January 30, 2017 - Amazon.com Reports Q4 Earnings February 2
What's Happening
Tech titan Amazon.com (AMZN) will report its fourth-quarter numbers on February 2. The company will announce its quarterly results after the market close, with the consensus calling for earnings of $1.41 per share. During the same period last year the company earned $1.00, and the stock is up 43.1% over the last twelve months.
Technical Analysis
AMZN was recently trading at $834.64, down $12.57 from its 12-month high and $360.64 above its 12-month low. Technical indicators for AMZN are bullish and the stock is in a strong upward trend. The stock has recent support above $805.00 and has recent resistance below $843.75. Of the 29 analysts who cover the stock, 22 rate it a “strong buy”, four rate it a “buy”, two rate it a “hold”, and one rates it a “strong sell”. The stock receives S&P Capital IQ’s 4 STARS “Buy” ranking.
Analyst's Thoughts
Amazon has been a Wall Street darling for many years, and investors remain very bullish on the stock. The stock trades at $834.64, but analysts have an average price target of $907.11, which suggests 8.6% upside potential. E-commerce has dramatically altered the face of retail, but its importance continues to grow. E-commerce currently accounts for less than 10% or all retail sales. In 2015, online sales were around $1.5 trillion, but that figure is forecast to hit $4 trillion by 2020. The number of customers who signed up for Amazon Prime rose around 38 percent last quarter, and that will be a key metric to pay attention to in Q4. Another reason to be upbeat on the stock is its Amazon Web Services, which has captured around 31% of the cloud-computing market, and revenue for the segment was up 55% last quarter. The company has so much going on, with its e-commerce business, cloud-computing business, and hardware offerings such as Amazon Echo and Fire TV. Amazon is constantly looking to innovate, and as such the company’s best days are still ahead. Earnings are expected to rise 41% year over year, and barring any huge earnings miss the stock will likely break out to a new all-time high following the report.
Stock Only Trade
If you're looking to establish a long stock position in AMZN, consider buying the stock under $834.00. Sell if it falls below $750.50 or take profits if it gets to $959.00.
Bullish Trade
If you want to set up a bullish hedged trade on AMZN, consider an April 730/735 bull-put credit spread for a 40-cent credit. That's a potential 8.7% return (37.8% annualized*) and the stock would have to fall 11.9% to cause a problem.
Bearish Trade
If you want to take a bearish stance on AMZN at this time, consider an April 925/930 bear-call credit spread for a 50-cent credit. That's a potential 11.1% return (48.3% annualized*) and the stock would have to rise 10.9% to cause a problem.
Covered Call Trade
If you like the stock, but wish to lower your cost basis on a new position, you may want to consider an April $830.00 covered call. Buy AMZN shares (typically 100 shares, scale as appropriate), while selling the April $830.00 call for a debit of $792.25 per share. The trade has a target assigned return of 4.7%, and a target annualized return of 20.9% (for comparison purposes only).
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