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Amazon Q4 earnings: online retailer to feel the pinch of higher costs and slowing consumer spending

By Daniela Hathorn

09:59, 25 January 2023

photo illustration an Amazon logo seen displayed on a smartphone.
photo illustration an Amazon logo seen displayed on a smartphone - source: getty images

Much like Microsoft and Alphabet, Amazon has announced a slew of job cuts, up to 18,000 of them, as it adapts to the uncertain economic environment after rapidly expanding its workforce over the past few years. 

Shares of the online retail giant saw a boost in the first week of the new year as the layoff plans were announced, a sign of relief from investors. The reality is that after a decade of cheap money and a booming tech industry in the aftermath of the covid-19 pandemic, we’ve come to a time where cost-cutting is going to be the norm for a few years as companies attempt to save their profit margins.

Q4 earnings estimates

EPS: $0.17

Revenue: $145.37Bln

 

AMD

151.35 Price
-3.270% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.11

COIN

256.98 Price
+8.980% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.51

TSLA

239.25 Price
-4.530% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.14

GME

25.06 Price
-4.370% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.14

After a strong boost on the back of remote working and studying during the pandemic, the demand for cloud services has dropped over the last 9 months, as has the need to rely on online retailers. Amazon Web Services (AWS) is expected to have slowed its growth in 2022 after a stellar performance in 2021 as many companies slow their migration to the cloud, but Q4 is still expected to show a 20% increase from the previous quarter. 

Revenue in the fourth quarter is expected to be 14% higher than in the previous 3 months as inflation pushes up the price of goods. But with the costs of these goods rising proportionately, the gross profit margin for the quarter is expected to drop from 44.7% to 41.6%, evidencing the drop in online retail demand. I expect investors will be particularly focused on the company’s forecasts for Q1 2023 as consumer spending continues to slow. 

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Technical analysis

The recent rally in AMZN has found some resistance just below the $100 mark (99.32) which is likely to remain a key area targeted by sellers heading into the earnings release next week. Being there, the areas between 103.77 and 104.95 was key in stopping buyers from recovering the losses seen in October/November last year, so likely another area to focus on. 

The RSI has been breaking to new highs throughout January but the price has failed to catch up, sitting below the highs seen on November 15th meaning the move higher has been exhausted. For the path of least resistance to be on the upside we would need to see the RSI break above the high on January 13th at the same time the stock price moves past 99.32.

AMZN daily chart

AMZN daily chartAMZN daily chart. Photo: capital.com. Source: tradingview

Broker recommendations 

Amazon Broker RecommendationsAmazon Broker Recommendations - Source: Refinitiv

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Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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