Amazon Q4 earnings: online retailer to feel the pinch of higher costs and slowing consumer spending
09:59, 25 January 2023
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
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 chart. Photo: capital.com. Source: tradingviewBroker recommendations
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