Great Expectations: Amazon Q1 Earnings

As Amazon gears up to announce its first-quarter earnings for 2024 after today’s closing bell (April 30th), traders are poised to capitalise on the potential volatility and opportunities that this news event may bring to the market.

Let's delve deeper into what investors can expect from Amazon's Q1 earnings by examining market expectations, growth drivers, and key levels to keep an eye on.

Anticipated Financial Performance

Analysts are currently forecasting that Amazon's first-quarter revenues will reach approximately $142.53 billion, reflecting a slight decrease from the previous quarter's revenue of $170 billion. This anticipated decline is partly attributed to seasonal factors and potential challenges in consumer spending amid global economic headwinds.

However, despite the expected dip in revenue, analysts remain optimistic about Amazon's profitability. The consensus estimate for Amazon's diluted earnings per share (EPS) in Q1 2024 stands at $0.83, indicating a slight decrease from the previous quarter's EPS of $1.00. Despite this decrease, Amazon is poised to maintain its strong profitability, driven by efficient cost management and continued growth in high-margin segments such as Amazon Web Services (AWS) and advertising.

Key Growth Drivers

Several factors are expected to drive Amazon's performance in Q1 2024:

E-commerce Momentum: Despite potential headwinds from supply chain disruptions and inflationary pressures, Amazon's core e-commerce business is anticipated to continue benefiting from the ongoing shift toward online shopping. Analysts project that Amazon's gross merchandise volume (GMV) will remain robust, supported by strong demand for a wide range of products and services offered on its platform.

Amazon Web Services (AWS): As a leading player in the cloud computing market, AWS is expected to maintain its growth trajectory in Q1 2024. Analysts anticipate that AWS revenues will continue to grow, driven by increased adoption of cloud services by enterprises and the expansion of AWS's global footprint.

Advertising Revenue: Amazon's advertising business is forecasted to experience strong growth in Q1 2024, fuelled by the growing adoption of its advertising solutions by brands and sellers on its platform. Analysts expect that advertising revenues will surpass $10 billion for the quarter, reflecting a significant increase from the previous year.

AI: Amazon's ongoing investments in innovation and technology, including AI and machine learning, are expected to drive future growth. The company's focus on enhancing customer experience through initiatives such as custom generative AI chips is anticipated to strengthen its competitive position and drive long-term value for shareholders.

CEO Commentary and Strategic Outlook

Investors will closely monitor CEO Andy Jassy's commentary on Amazon's strategic priorities and outlook for the future. Jassy's insights into Amazon's expansion plans, investments in infrastructure and technology, and efforts to drive innovation will provide valuable insights into the company's long-term growth prospects and positioning in the competitive landscape.

Key Levels: Bullish Reversal Pattern Emerges Ahead of Earnings

Amazon's share price has surged more than 20% year-to-date, underscoring the market's bullish sentiment and high expectations heading into the upcoming earnings report.

Recent price action has delineated several key levels that traders should monitor closely leading up to the Q1 earnings release:

Bullish Abandoned Baby Variation: Last week, Amazon's price action formed a variation of the bullish abandoned baby candle pattern. This pattern occurs when the shares gap lower but subsequently gap higher in the following session, creating an abandoned candle. While the abandoned candle in this variation is larger than usual, its significance remains noteworthy. The lows of the abandoned candle serve as significant support levels, providing key reference points for traders post-earnings.

Monday's High: During Monday's trading session, Amazon's shares experienced a gap higher, followed by a close at the top end of Friday's range. This development establishes a minor inflection point for traders to monitor, signalling potential bullish momentum leading into the earnings announcement.

April High: The highs achieved in April represent a crucial resistance level that may come into play should Amazon's share price test these levels post-earnings. Traders should be attentive to any price action around this level, as a breakout could signal further bullish momentum, while a rejection may indicate potential consolidation or a reversal.

AMZN Daily Candle Chart

(Past performance is not a reliable indicator of future results)