Earnings preview: Amazon and Alphabet

12:10 2 February 2021

Two key US earnings reports of the week will be released today after the close of the Wall Street session - Amazon (AMZN.US) and Alphabet (GOOGC.US). Results of these mega-cap companies may become important drivers for the sentiment towards the US tech sector, especially as recent retail speculative frenzy seems to be easing. Let's take a look at what market expects from both reports and what to look at.

Amazon

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Amazon (AMZN.US) is trading around 2.5% higher year-to-date. Company is expected to report a record quarterly revenue of $119.70 billion, up 36.9% year-over-year, and net profit of $6.11 billion, 87% year-over-year higher. Adjusted EPS is expected to come in at $10.43, compared to $6.47 in Q4 2019. This would be the first time Amazon generated over $100 billion in revenue during the quarter. Expectations of solid performance can be explained with the Christmas holiday period and the fact that coronavirus pandemic has encouraged more customers to shop online. Investors will also look at how Amazon's AWS cloud performed amid increased adoption of work-from-home schemes. Market consensus points to a 28% year-over-year revenue increase to $12.8 billion. Any announcements on the expansion of operations into new countries will also be on watch.

Shares of Amazon (AMZN.US) have been trading in a triangle pattern since early-September 2020. Price has approached the upper limit of the pattern recently and earnings release could be make or break for the stock. A break above the pattern would create a bullish bias on the chart and may herald an attack at all-time highs in the $3,550 area. On the other hand, should earnings disappoint and stock pullback, first support to watch can be found at the 100-session moving average ($3,180 area). Source: xStation5

Alphabet

Alphabet (GOOGC.US) is trading 8% higher year-to-date. Company is expected to report revenue of $44.50 billion (excluding traffic acquisition costs), or 4.2% year-over-year lower, and a record net income of $12.35 billion, up 23.6% year-over-year. Adjusted EPS is seen coming in at $17.60, compared to $14.37 in Q4 2019. Alphabet is expected to benefit from strong holiday season ad sales, just as Facebook did. However, an important thing to note when it comes to upcoming results is that Alphabet decided to make changes on what it will report. Company decided to report results for three segments (also results for past periods going back to 2018):

  • Google Services - including search, advertising, YouTube, Chrome and Google Play results among others

  • Google Cloud - including results from infrastructure and data-analytics platforms

  • Other Bets - including driverless car project Waymo

Results will include revenue as well as operating profit or loss for each segment. This will be the first time Alphabet releases profitability data for its cloud business and it is likely to be in focus. While cloud is a relatively small part of Alphabet's business, it is growing fast and becomes more and more important.

Shares of Alphabet (GOOGC.US) have caught a bid following a double test of the lower limit of the Overbalance structure (red box). Stock is recovering from last week's decline and looks towards recent all-time highs in the $1,932 area. Positive earnings surprise could easily push the stock to new record levels. In case of a pullback, support at $1,840 will be the first target for sellers. Source: xStation5

This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

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