Should I buy Amazon shares before Q3 results?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Oct 27, 2021
  • Amazon will announce Q3 results on Thursday
  • The company's management expects revenue growth
  • $3,500 represents current resistance

Amazon.com, Inc. (NASDAQ: AMZN) shares have advanced from $3,289 above $3,460 since the beginning of October 2021, and the current share price stands at $3,421. Amazon will announce third-quarter earnings results on Thursday, October 28, after the market closes and new CEO Andy Jassy expects further business improvements.

The company’s management expects revenue growth

Amazon’s business continues to grow rapidly, and the company has become a supply channel for many consumers in the age of the COVID-19 pandemic.

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Amazon will announce third-quarter earnings results on Thursday after the market closes, and the company’s management expects revenue growth between 10% and 16% in the third quarter compared with the third quarter in the 2020 year.

For the third quarter, the company’s management expects operating income of $2.5 billion to $6.0 billion, which is a drop from last year’s operating income of $6.2 billion in the same quarter.

The main reason behind the drop in operating income is increased costs of operation; the company has been spending aggressively on hiring staff and expanding fulfillment center capacity.

The number of employees has increased from 867,000 in the second quarter of the 2020 year to 1.34 million in the second quarter this year while the company introduced ​a slew of incentives, including increased wages, bonuses, and free college tuition.

Adobe forecasts online holiday sales will increase 10% this year compared with the previous year, and Amazon will certainly be one of the major players. The National Retail Federation added:

Online sales will jump 11% to 15% to between $218.3 billion and $226.2 billion. Consumers are in a very favorable position going into the last few months of the year as income is rising, and household balance sheets have never been stronger.

According to the latest news, Amazon announced 150,000 seasonal jobs available across the U.S. which will help support full-time employees. New CEO Andy Jassy expects further business acceleration and higher levels of profitability for the upcoming period.

It is important to say that analysts on Wall Street expect Amazon to report third-quarter revenue of $111.6 billion which is higher than the upper end of management’s forecast, while the earnings per share should be around $8.9.

The consensus Wall Street rating on Amazon remains bullish, but Amazon shares are not undervalued. Amazon is in a good position to grow its business, but with a $1.73 trillion market capitalization, this stock does not represent an opportunity for long-term investors.

$3,500 represents current resistance

Technically, Amazon shares could advance above the current price levels if the company posts strong third-quarter results.

Data source: tradingview.com

Amazon shares continue to trade above the strong support level at $3,000, and if the price jumps above $3,500 resistance, the next target could be $3,600. On the other side, if the price falls below $3,200 support, the next target could be at $3,000 support or even below.

Summary

Amazon will announce third-quarter earnings results on Thursday, October 28, after the market closes, and the company’s management expects revenue growth between 10% and 16%. Amazon shares are not undervalued, but if the price jumps above $3,500 resistance, the next target could be $3,600.

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