Amazon Q4 preview: Where next for Amazon stock?

When will Amazon release Q4 earnings?

Amazon will release fourth quarter earnings on Thursday February 3.

Amazon Q4 earnings preview

Wall Street forecasts Amazon will report 9.8% year-on-year growth in revenue in the fourth quarter to $137.9 billion, toward the upper-end of the company’s $130.0 billion to $140.0 billion guidance range. That will be the fourth consecutive quarter of slower topline growth and the year-on-year figure will be impacted by strong comparatives from last year, when its annual Prime Day sales event was pushed back into the fourth quarter in 2020. Still, some analysts think Amazon could surprise at the topline due to evidence that there was strong spending over the busy holiday season. Amazon had previously said it would grow revenue by 4% to 12%.

Sales from its core online stores are forecast to be broadly flat from the year before at $66.4 billlion, with growth in the retail arm poised to be driven by an 8% rise in sales within its newer physical stores and a 14% rise in sales of the swathe of services it provides third-party sellers using its platform.  

Rising costs are a factor weighing on the profitability of its retail business, with Amazon battling against higher expenditure on everything from labour to transportation.

This places more pressure on its higher-margin operations such as its subscription services, including Prime, which is expected to deliver stronger topline growth of almost 17% year-on-year to $8.2 billion in the quarter.

Amazon Web Services, its market-leading cloud computing division, is forecast to deliver a 35% jump in revenue in the final quarter to $17.2 billion.

Amazon has said operating income will be between breakeven and $3.0 billion in the fourth quarter. Analysts forecast this will fall by almost 65% from last year, again because of tough comparatives, to $2.43 billion from $6.87 billion. Diluted EPS is set to follow lower to $3.89 from $14.09 last year.

Analysts currently believe Amazon will aim to grow revenue by over 11% year-on-year to $120.8 billion in the first three months of 2022, while operating income is expected to experience a sharp 32% decline to $6.1 billion.

Where next for AMZN stock?

Sellers managed to push Amazon shares to a 19-month low last week of $2,707 before the price fell low enough to attract buyers back into the market. A new bearish signal emerged last week, when the 50-day and 100-day sma both slipped below the 200-day sma (with the 50-day also falling below the 100-day). That is reinforced by the RSI, which remains in bearish territory.

That suggests there is further room for Amazon shares to fall. The lowest closing price of last week of $2,777 remains the immediate floor for the stock - but a break below here could be significant as it opens the door to the level of resistance turned support throughout the second quarter of 2020 at $2,505.

On the upside, the first target is $3,027 in order to close the small gap that appeared two weeks ago before it can aim to recapture the moving averages, starting with the 50-day at $3,321, then the 100-day at $3,357, before it can eye the 200-day at $3,375.

The 55 brokers that cover Amazon are extremely bullish. All of them except one believe the stock is undervalued, with 20 rating the stock as a Strong Buy, 34 as a Buy and just one as a Hold. The average target price of $4,095.17 suggests there is almost 37% potential upside from the current share price.

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