Amazon (AMZN) stock gains 12% after earnings loss

AMZN stock jumped after the earnings report late Thursday.
Amazon recovers grond on revenue but Rivian loss grows.
AMZN stock bounces as the market was short and had priced in more bad news.

Ivan Brian FXStreet

UPDATE: AMZN stock rallied 11.9% to $136.80 on Friday morning after its Q2 earnings miss on Thursday night still impressed the market by beating revenue projections and offering up strong growth from its cloud business. The rally in the share price is, however, below the post-market spike of 13.6% on Thursday evening. The stock opened lower and reached a session low of $132.41 on Friday before steadily rising above $136. The session high thus far has been at $137.65, but the price movement has been tamped down after the initial run up.

Amazon (AMZN) stock soared in post-market trading on Thursday as the online retail giant engineered a relief rally in its stock based on its revenue recovery. Rivian (RIVN) continues to be a drag on the bottom line with an EPS loss missing estimates by a mile, but positioning and sentiment had been overly negative in Amazon. Hence a massive relief rally ensued after earnings.

Also read: Amazon Stock Deep Dive: AMZN price target at $106 with near-term risks offset by long-term growth

Amazon earnings news

A snippet from our recent deep dive on Amazon is reassuringly prophetic: "As outlined above, the Rivian stake should provide further losses, and the strong US dollar and supply chain issues will continue to put pressure on margins. However, we do feel the continued growth of AWS will serve to partially offset these concerns but only over a longer time horizon."

Rivian certainly did provide further losses to the tune of another $3.9 billion from Amazon's stake in Rivian. Again though Amazon Web Services (AWS) saved the day as revenue grew to just under $20 billion, marking a 33% yearly growth rate. Curiously, advertising also showed strong growth, moving nearly 20% higher from a year earlier to $8.7 billion. Amazon is not a social media company, but advertising metrics from Alphabet (GOOG/GOOGL), Meta Platforms (META) and Snap (SNAP) had all shown digital advertising declines. Revenue forecasts were solid with the company upgrading its outlook. The consensus was set at $126 billion, but Amazon is forecasting $127.5 billion at the midpoint of its guided range.

Amazon stock forecast

We are sticking with our HOLD rating as we tweak our forecast model slightly to account for impressive growth in AWS and the lower share count from the continued share buyback program.

Source: FXStreet calculations and Refinitiv

Technically, the outlook is more positive in the short term. A volume gap could see the rally extend up to $140, but that level would be strong resistance. Next quarter will also be difficult though. We feel a lot of this current rally was based on relief and under-positioning. The CEO has alluded to continued inflationary pressures that we mentioned in our deep dive review, and these will not have diminished by next quarter.

“Despite continued inflationary pressures in fuel, energy and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network,” said Andy Jassy, Amazon CEO.

AMZN daily chart

Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

AUD/USD flirts with 0.7000, lowest since early August amid bullish USD

AUD/USD hits a fresh low since early August during the Asian session on Friday and looks vulnerable near 0.7000 after breaking below the 200-day SMA overnight. Against the backdrop of the hawkish Fed, a two-day rally in oil prices revives inflation fears and continues to push US bond yields to multi-year highs. Adding to this, geopolitical risks lift the US Dollar to a two-month high, overshadowing RBA rate hike bets and weighing on the pair.

USD/JPY pulls back from three-week high after failing near 159.00

USD/JPY edges lower during the Asian session on Friday, stalling its recent strong move to a three-week high of 159.00 as Japanese Yen bears turn cautious amid intervention fears. Meanwhile, the US Dollar retains a strong bullish undertone as the Fed's hawkish outlook and oil-driven inflation fears continue to push US bond yields to multi-year peaks. Furthermore, the BoJ's dovish rate hike last week might cap JPY and support spot prices.

Gold treads water below $4,300

Gold grabs some buying attention and advances marginally at the end of the week, partially retracing the weekly decline, although it is still navigating below the key $4,300 mark per troy ounce. The fresh selling bias on the Greenback and the modest decline in US Treasury yields appear to support the humble advance in the precious metal.

Week ahead: Rate hike bets face a crucial data week

Despite the solid drop from the mid-September high, oil prices remained in the driver’s seat for another week, setting the tone in financial markets. Six months have passed since the late-February start of the US-Iran conflict, and there is still no breakthrough in the stalled talks, despite pressure from regional leaders and the rest of the world.

CFTC Report: Defensive currency positioning takes hold

The week in one sentence: Sterling and Euro shorts deepened in the week to September 22, while Yen longs were cut sharply. Oil positioning improved despite a steep price decline, and Gold exposure remained crowded. The main signal was a more defensive currency positioning backdrop.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.