What Amazon’s Chart Says Ahead of Next Week’s Earnings ReportAmazon NASDAQ:AMZN has been reducing its exposure to U.S. tariffs on Chinese imports recently, and is also possibly slowing down its AI-related infrastructure purchases as the online-retail giant prepares to report Q1 earnings next week. What does fundamental and technical analysis say could happen next for the stock?
Let’s check it out:
Amazon’s Fundamental Analysis
AMZN plans to release its earnings after the bell next Thursday (May 1) in the middle of an interesting period for the company.
Published reports recently indicated that Amazon has been canceling orders from some Chinese vendors in a bid to avoid the Trump administration’s new 145% tariffs on the Asian nation’s goods.
After all, Amazon would be the "importer of record" for items purchased at the wholesale level, and that’s who actually gets Uncle Sam’s tariff bills.
Of course, the tariff situation remains murky, as the Trump administration appeared this week to seek a de-escalation of its trade wars with China and other countries.
Meanwhile, Wells Fargo this week released a research note implying that Amazon could possibly become the second hyper-scaler to slow down on AI-related infrastructure purchases.
The report posited that AMZN has put some leasing discussions for the co-location of its data centers on hold. If true, that would make Amazon the second hyper-scaler to ease AI-focused capital-expenditure spending, following the lead of its key cloud competitor Microsoft NASDAQ:MSFT .
However, TD Cowen published its own research note on Monday that offered a potentially different explanation of what's going on at Amazon.
Cowen agreed that AMZN has been walking away from some co-location deals, but argued that the change stems from Amazon shifting to a preference for operating its data centers on company-owned properties.
Cowen noted that Amazon “continues to move ahead with powered shells and self-builds." The firm also pointed out that other major hyper-scalers Meta Platforms NASDAQ:META , Alphabet NASDAQ:GOOG NASDAQ:GOOGL and Oracle NYSE:ORCL haven’t shown any signs of slowing down their collective appetite for securing increased capacity through co-location.
In fact, Amazon CEO Andy Jassy recently wrote in his annual letter to shareholders that generative AI “is going to reinvent virtually every customer experience we know and enable altogether new ones about which we've only fantasized.”
He also said that’s why Amazon’s Amazon Web Services cloud business is “quickly developing the key primitives (or building blocks) for AI development.”
Jassy said those efforts includes such things as “custom silicon AI chips in Amazon Trainium to provide better price-performance on training and inference, highly flexible model-building and inference services in Amazon SageMaker and Amazon Bedrock, our own frontier models in Amazon Nova to provide lower cost and latency for customers’ applications and agent creation and management capabilities."
Hmm, does that sound like a CEO who’s cutting back on AI investment? Not to me.
Jassy did say that chips or GPUs are the reason why Amazon’s AI investments are so expensive, but added that those costs should be headed lower in the future.
Why? Because the firm's own Trainium2 chips offer performance that is 30% to 40% better in some ways than what the firm is purchasing from exterior providers.
That might not be so great for Nvidia NASDAQ:NVDA , but it doesn't sound like a problem for Amazon.
All in, the Street is looking for Amazon to report about $1.36 of Q1 GAAP earnings per share on roughly $155 billion of revenue.
That would represent a 38.8% EPS gain compared to the company’s year-ago results of $0.98, as well as more than 8% y/y growth in revenues.
While many investors would view such year-on-year growth as reflecting a solid quarter, that would also mark a deceleration of growth rates for Amazon. After all, the company hasn’t seen less than 8.5% y/y sales growth for any single quarter since Q2 2022.
I also don't know if Amazon will issue any forward guidance given our current environment of unclear tariff policies.
Amazon’s Technical Analysis
Now let’s check out AMZN’s chart going back some seven months:
Readers will first see a sloppy-looking “head-and-shoulders” pattern that formed over recent months, marked with purple boxes above. That appeared to point to a bearish reversal.
In fact, that’s exactly what happened to Amazon, leading to a sell-off that bottomed out in early April at close to $161.
But interestingly, this pattern seems to have since morphed into a potentially bullish small “double-bottom” pattern (the black diagonal lines at right) that shows a $191 pivot at its conclusion. (AMZN was trading at $186.92 Friday morning.)
Amazon also appears to have suffered a so-called "death cross" in recent days without being adversely impacted.
A “death cross” occurs when a stock’s 50-day Simple Moving average (or “SMA,” marked with a blue line above) crosses below its 200-day SMA (marked with a red line above). This is historically a bearish signal -- but anecdotally, I’ve noticed that to be true less and less often with stocks of late.
Meanwhile, readers will notice that Amazon’s Relative Strength Index (the gray line at the chart’s top) is neutral, although rising.
Separately, the stock’s daily Moving Average Convergence Divergence indicator (or “MACD,” marked with gold and black lines and blue bars at the chart’s bottom) is postured rather bullishly.
True, Amazon’s 12-day Exponential Moving Average (or “EMA,” marked with a black line) and 26-day EMA (the gold line) are both below zero. That’s historically a bearish signal.
But on the positive side, that 12-day line is above the 26-day line, which is typically bullish. The histogram of Amazon’s 9-day EMA (the blue bars above) has also moved above the zero bound, which is also often a bullish sign.
(Moomoo Technologies Inc. Markets Commentator Stephen “Sarge” Guilfoyle had no position in AMZN at the time of writing this column.)
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