AMZN: Q2 Preview & Thoughts

by Dan July 26, 2012 12:29 pm • Commentary

Event:  AMZN will report its Q2 earnings after the bell tonight.  The options market is implying about a 8.7% move vs the average of about 10% over the last 4 qtrs.

Sentiment: Wall Street analysts are generally fairly positive on the name with 30 Buys, 13 Holds and only 1 Sell, with an average 12 month target of ~$260 .  Short intertest sits at only about 2.5% of the float.


Consensus Expectations:

Q2: EPS= .43 ,      Revs= $12.9b  Guidance: $11.9b to $13.3b

Q3: EPS= .50,       Revs= $14.1b

2012: EPS= 2.43, Revs= $63.15b


Technicals from Enis:

AMZN is a messy chart.  It has been stuck in a relatively tight range (for a stock this volatile) for the past year, trading between 170 and 240 (except for a couple brief breaks):



You can see that all of the high volume bars are due to earnings reports, all on big gaps too. A similar scenario is priced in the options for tomorrow’s price action.


On the weekly chart (5 years), you can see the long-term uptrend has remained in tact, even during the wobbles of last fall.  The 190-200 area could be an important area of support to hold that trend as a result:




Implied vol is elevated going into this event and much higher than its histrical average across all months which is in the mid to high 30’s

But the big story is just how inflated the front week options are. Here’s a look at options by month:

You’ll notice the weeklies are off the charts as the market is pricing in a more than 22 dollar move on earnings.


My View: You have heard it here a dozen times, AMZN is a great company, not certain it is an investable stock.  As a consumer I couldn’t be happier with the company and frankly I am big customer, as an investor I am not certain no matter how much they can realistically grow margins above the recent near zero margins, but the stock is never likely to “grow into”certain valuation metrics that are off the charts whether op margins are 1% or 5%.


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