Amazon.com (AMZN) reported earnings after the market closed on Thursday. The company missed Wall Street profit estimates by fifteen cents a share, and fell well short of the expectation from WhisperNumber.com by seventeen cents. An Amazon earnings miss is not a rare event as the company has only topped the whisper in 27 of the 59 earnings reports for which we have data, a 46% positive surprise history.
The company reported that sales in the holiday quarter increased at the slowest rate since 2008. Revenue rose 20% to $25.6 billion. In after hours trading last night the stock suffered an 8% loss indicative of widespread disappointment. The next thirty days may just add even more weakness.
The following table shows Amazon's reported earnings per share over the past seven quarters alongside the whisper number expectation from contributing investors and traders.
Our primary focus is on post earnings price movement. In other words, we look at what happens when the company beats or misses the whisper number expectation. This price movement analysis has been confirmed through our 15-year track record, and by multiple independent academic studies that show whisper numbers provide greater returns when used as an investment vehicle, and have a greater impact on stock movement than analysts' consensus estimates.
The company has now reported earnings short of the whisper number in six of the past seven quarters. In the comparable quarter last year, the company reported earnings eight cents short of the whisper number. Following that report, the stock realized a 5.7% loss in five trading days. Last quarter, the company reported earnings two cents short of the whisper number. Following that report, the stock realized a 9.9% gain in thirty trading days.
The table below indicates the average post earnings (intra-day) price movement for Amazon within a one and thirty trading-day time frame:
The strongest price movement of -3.1% comes within twenty trading days when the company reports earnings that miss the whisper number. The overall average price move is 'negative' when the company reports earnings starting at market open through thirty trading days. Based on the above data, and a big miss of expectations, it's reasonable to believe that the stock will continue to see weakness (averaging 3%) on top of the negative pre-market move over the next thirty trading days.
Since 1998, WhisperNumber.com has been tracking and publishing 'crowd sourced estimates' for earnings. We call these earnings expectations whisper numbers. Our whisper numbers are gained from individual investors and traders just like you that have registered with our site. While the whisper number itself is an important part of our analysis, a company's 'price reaction' to beating or missing the whisper number expectation is the key. On average, companies that exceed the whisper are 'rewarded', while companies that miss are 'punished' following an earnings report. Trading on whispers is a technical play on market psychology, rather than a bet on a company's fundamental strengths.