Amazon (AMZN) is currently scheduled to report earnings on April 26. Over the past few years, Amazon has been one of the fastest growing stocks. Amazon will report earnings after fellow internet competitors Apple (AAPL) and Google (GOOG).
In anticipation of the upcoming earnings report, investors can look at past earnings releases and information contained in them in order to foreshadow stock behavior. This article looks at the data in past earnings releases, the stock movement before and after earnings release, and the change in Amazon implied volatility - while making sense of the information contained in them.
The above table shows the earnings history for Amazon stock. As a stock that trades well over 100 times earnings, it is important to note that investors aren't very concerned about profit. Instead what investors are most concerned with is revenue. They want to see that Amazon continues to grow its revenue and increase market share. Long-term investors are hoping that profits will come in the future as Amazon replaces the Wal-Marts and Best Buys of society.
The upcoming earnings release has an EPS estimate of $0.08 and a revenue estimate of $12.9B.
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The above graph shows the relative change in the stock price of Amazon for the week of earnings. The stock price for each earnings week has been normalized to 100 so that its price movement can be compared. The yellow points indicate the close before the earnings release.
Even though Amazon beat earnings last quarter, it fell well short of revenue estimates. This caused a price drop after earnings release (see dark blue line). Likewise, last October Amazon barely missed the revenue estimate and tanked (see red line), however it should be noted that the entire market was severely volatile at that time. It should be noted that after the initial drop in price the stock price rebounded the next two days so if Amazon falls again it could be a good buying opportunity.
Amazon beat revenues last April and July and the stock price popped (green and purple lines). Amazon's price is clearly driven by revenue. The stock moved last April despite a substantial miss in EPS.
The above graph shows the rise in implied volatility on Amazon options. It is important to note that Amazon used to report earnings late in the week, but has since begun reporting earlier.
The implied volatility of Amazon shows a very clear pattern. The IV starts very flat and jumps over the weekend as earnings approaches. This information is very valuable for any option trader who is attempting to profit from a rise in IV. Depending on when an investor enters the trade a target implied volatility of below 70% might be ideal. The implied volatility could easily climb to greater than 100%.
Amazon investors are clearly driven by the company's revenue. Investors don't care about earnings, but want to see a noticeable increase in revenue and even a slight revenue miss will be considered a disappointment.
The stock shows a minimal movement before the earnings release, however after the release the stock can make very substantial price movements. If the stock falls after earnings it has shown a tendency to rebound.
The implied volatility skyrockets before the earnings release and falls afterwards. The increase in IV doesn't occur until after the weekend in the couple days before earnings release.
Additional disclosure: I have a reverse iron condor option position open in AAPL. I have no positions in AMZN or GOOG, but may initiate a long, short, or non-directional position in [[AMZN, GOOG, or AAPL over the next 72 hours.