AMAZON – Finding opportunity in crisis

Amazon (AMZN), one of the three Wall Street giants with a market value over  $1 trillion (along with Microsoft and Apple) will report its earnings for the first quarter 2020 after the US market is closed. It’s worth noting that Amazon is a gigantic company, with its stock at record highs despite the Covid-19 crisis that is still ongoing. This year, the stock price has risen by more than 28.40%.

As an online retailer, Amazon has benefited from the lockdown which has been observed since mid-March. Up to now, Amazon has hired more than 175,000 temporary employees to support consumer behavior that has changed from offline spending to a spike in online spending.

New tendencies arising from the Covid-19 situation are expected to continue and it is likely to see consumers’ behaviour changing into a “new normal” that could be beneficial for Amazon in the long run.

Amazon Prime, a major competitor to Netflix, is another Amazon service that has clearly benefited from people staying in their homes. Even though there are no official membership report numbers,  according to reports in the fourth quarter 2019, Amazon Prime’s global membership is over 150 million and more than 110 million in the United States.

As for revenue, according to Zacks reports, the earnings per share in the first quarter are expected at $6.34, while the previous quarter was $6.47 and the same quarter last year was $7.09. It is expected that revenue will be around $73.42 billion, which is 22.9% higher than the same quarter of last year. However, it is expected that although sales in the first quarter of this year will be higher due to the Covid-19 situation, the profit may not increase accordingly as there is an increased cost of managing security for employees during social distancing.

From the technical perspective, in the Weekly Timeframe, the stock price was falling until mid-March. This was the beginning of the Covid-19 outbreak. Immediately after that Amazon hired 100,000 new employees, something that has been interpreted as positive from the markets and hence spiked the price from the low of the year to record highs. The stock has been moving sideways the past 2 weeks and is currently below $2,400 per share, around $80 below record highs.It is normal behavior for investors to hold away from an asset before the company’s earnings report.

Further incline for the asset could find strong Resistance at the 161.8 Fibonacci extension from February’s decline, at $2,520. On the flipside, a pullback could find support at mid-February highs at $2,185 (also 100 FE). If that level breaks then the next support could be seen at the confluence of 50% Fib. retracement level from March rebound and at 50-day SMA at $2,035.


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Chayut Vachirathanakit
Market Analyst – HF Educational Office – Thailand

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