Amazon Earnings Preview

Well the time has come for Amazon to report in 10 days and I had some time to update you all tonight so I put together this long writeup. As you all know this is my only positions at the moment so I figured I would discuss my thoughts. They were supposed to report in late July but pushed it back a week, my assumption is that they wanted to see what came of the potential UPS strike next week. I’m going to breakdown every segment and what I’m thinking now and going forward.

I first took my initial position in the Amazon leaps I hold on May 16th. 2 days later I wrote this long piece on why I thought Amazon was a generational buy at the time around $117/share.

Link

Since then Amazon rallied to a high of $136.xx and has fallen back to earth some since. I’ve gone over my rationale for the December 2025 leaps that I hold, how my breakeven is at $138 which is almost impossible for it not be at by then considering it was $188 in 2021, but with the call calendars I can sell vs the position, I felt this was a no brainer, slam dunk, once in a lifetime potential trade on a company I knew better than any other which also happened to be the name with the most bullish activity in my database. How could I not do it?

Let’s talk about Amazon the business. This is a company that just 3 years ago was emerging from a multiyear base when covid struck. As you can see below the company first hit $100/share split adjusted in Q3 2018 then finally broke out of that base in Q1 2020 with the January report before Covid was a thing. From there it exploded and stayed at much higher levels for the next 2 years until the pandemic ended and it sold off from $188.xx to $81.xx.

The full view is below. You can see 3 months ago is when Amazon finally reclaimed that trend which was when I got in. You can see the RSI was breaking out, you can see the macd finally flipped green on the monthly this month and I wanted to make sure I was in before all that. Now you see the moving averages sloping up and Amazon is finally ready to make a push, if it can start reporting some good numbers. Here’s the problem, it really hasn’t done that in over 2 years, how can we trust them to now?

Amazon has always been focused on growth and to be honest amongst the mega caps at this juncture it really is still the only one actually growing its most important segments. Apple had negative revenue last Q, Google had flat Ad growth last Q, MSFT saw its core business up single digits as well. Amazon was the only company amongst the giants who saw its main business, services, up 20% YOY but the problem was the same as always, they could not control capex, but the hope is they are turning a corner and it’s slowing.

Andy Jassy stepped in as CEO in July 2021, the stock was nearly $175/share and it is down 30% since he arrived. I don’t blame him for Amazon’s failures, Jeff Bezos set the plan in motion for all this CAPEX before he stepped aside. It was a weak move from Bezos authorizing all this spending and then running away without answering up to the mess it caused. That is one of my big gripes with Bezos, he treats Amazon like a personal fantasyland. He is the one who wants into the Hollywood elite circle so he authorizes all this wasteful spending on Prime Video, spending that eclipsed Netflix yet ads very little value to the company. If Prime Video was removed, the amount of people who would cancel Prime would be in the single digits in my book, the shipping service alone offers more than what you pay by alot. Then you have things like Project Kuiper which is so far behind Starling yet Bezos pushes forward with wasting billions on it even though it should be under his Blue Origin company. In my book, Jeff Bezos is a lost cause at this point, he left his life’s work behind to focus on his girlfriend, and that’s fine, but he needs to resign as chairman and let someone else come in. Someone who can focus on the business side and turn this $600b/yr of revenue into a viable business that makes money.

Let’s discuss each segment and where I think things are headed