Amazon.com (AMZN) shares were taking it on the chin Friday, down about 6% after the tech and online retailing giant reported quarterly results.
Some investors feel that the company reported a disappointing result. In some ways, it did. While Amazon is seeing a spike in demand and hiring 175,000 workers as a result, its bottom line is also taking a hit.
The company reported earnings of $5.01 a share, missing consensus expectations by $1.10. Revenue of $75.5 billion topped estimates by $1.4 billion and grew 26.5% year over year.
Amazon’s revenue outlook for next quarter was mostly in-line with expectations. However, management’s guide for negative $1.5 billion to positive $1.5 billion in operating revenue seems to be causing a pause among investors. That profit is disappearing due to Covid-19 costs, the company said.
Trading Amazon Stock
Facebook (FB) stock had a decent post-earnings move despite a big rally the day it reported earnings. While Amazon rallied higher into the print - up 4.3% on Thursday - it also hit new all-time highs, something Facebook is still a ways away from doing.
In other words, expectations were sky high for Amazon. While shares are down notably on Friday, keep in mind that the stock is only back down to where it was a few days ago. A larger retreat may be in store, but so far, this is far from the end of the world.
I would like to see Amazon hold its 10-day moving average, however that is looking unlikely at this point. This measure has been support for most of the month, although Amazon did close below this mark on Tuesday.
Should Amazon hold or reclaim this mark, it puts $2,450 back in play, which is resistance of the current range. Below the $2,300 to $2,320 area and Amazon will break below range support.
That puts the 20-day moving average on the table, currently near $2,265.
If that level fails as support, investors may be looking at a pullback to the $2,180 breakout mark. These were the highs from February and will hopefully act as support should Amazon stock pull back that far. That would represent a decline of roughly 12% from the highs.
However, if a pullback in Amazon comes alongside a larger correction in the broader market, we may see a deeper decline.
In that case, I would consider a decline to the multi-year breakout zone at $2,000 to $2,025 to be a solid buying opportunity for longer term investors. That would represent a decline of about 18% from the current high.
The bottom line: Stay flexible and look to see where support makes a stand.