Amazon Stock Earnings Preview: AMZN fills gap as market expects beat

One day after Federal Reserve Chair Jerome Powell charged up markets by saying any future interest rate hikes would depend on economic data, an admission the market took to mean the hiking cycle was over, Amazon (AMZN) stock is preparing for an earnings beat after the close as the stock has added 4.3% at $109.70 in Thursday's premarket.

Wall Street consensus for the quarter ending in December is $0.17 in GAAP earnings per share (EPS) on $145.77 billion in sales. The same quarter one year ago garned $1.39 a share on revenue that topped $137 billion.

Amazon stock earnings preview: Can AWS slow less than Azure?

Last week Microsoft (MSFT) disgruntled investors when Chief Financial Officer Amy Hood said growth in its Azure cloud business would drop from ~35% growth to ~30% in Q1 as corporations trimmed their spending in the face of an expected recession.

As the biggest purveyor of data centre and cloud infrastructure globally – at the end of the third quarter Amazon Web Services (AWS) held a 34% market share to Azure's 21% – Amazon's share price will rise or fall based on its cloud unit. AWS makes up about 16% of Amazon revenue at last check but produces a much greater share of the company's profits. During the third calendar quarter, AWS grew 27.5%, so the market will watch how annual growth in Q4 compares to that figure.

Bank of America Securities, MKM Partners and Oppenheimer all put out notes in the past week expecting that Azure's deceleration will translate directly to a slowdown at AWS. If that takes place, expect AMZN stock's regular session gains to be erased.

Besides cloud, Amazon needs to show resiliency in retail sales from its core business. According to data compiled by Mastercard (MA), ecommerce sales rose 11% YoY in the fourth quarter, so that is a positive sign for Amazon.

Lastly, the market will focus on how the 18,000 job cuts announced in January will affect guidance on margins. Expect healthier margins to lead to a larger uptick in the AMZN share price afterhours.

Amazon stock forecast

Amazon stock has rallied up to the top of the demand zone that worked well as support during the May through July period of 2022. That zone ranges from $101 to $109.50. Coincidentally, this also closes the gap from the gap down on October 28.

A break above this zone would allow bulls to retest the supply zone between $120 and $122 that acted as resistance on five occasions last October. Support sits nearby at $92.50 in the case of a major miss.

AMZN daily chart