Amazon Q3 Earnings Preview: Options Traders Anticipate 6.74% Volatility
Amazon (AMZN) is preparing to release its third-quarter earnings report on October 30. The options market suggests traders anticipate a significant volatility reaction, estimating a 6.74% price movement in either direction. This anticipated volatility contrasts sharply with Amazon’s historic average post-earnings move of just -0.75%.
Investors’ Focus Ahead of Earnings
Several key factors are likely to attract attention as Amazon approaches its earnings report:
- Cloud Segment Performance: The performance of Amazon Web Services (AWS) will be closely watched. AWS results come after tech giants like Microsoft and Alphabet reported their figures. Although growth in cloud revenue has slowed, Amazon has been making substantial AI investments, including plans for $75 billion in capital spending by fiscal 2025.
- Advertising Business Growth: Amazon’s advertising segment showed impressive year-over-year growth in Q2. Maintaining this momentum could alleviate some pressure on retail margins.
- Core E-commerce Business: With inflation stabilizing but consumer spending still facing challenges, investors are looking for signs that Amazon’s e-commerce segment remains resilient.
Analysts’ Predictions for Q3 Results
Wall Street analysts expect Amazon to announce earnings of $1.57 per share, a 10% increase from the previous year. Analysts predict revenues of $178 billion, up from $158.88 billion in Q3 of last year. UBS analyst Stephen Ju has recently increased his price target for Amazon to $279 from $271, while maintaining a Buy rating.
Ju has indicated that the company’s Q3 operating income might be slightly influenced by a $2.5 billion settlement with the FTC regarding Prime services. However, his forecast aligns with Amazon’s guidance of $15.5 billion to $20.5 billion. Additionally, he raised his estimates for Amazon’s first-party and third-party sales volumes and advertising revenues for the years 2025 to 2027. He emphasizes the importance of AWS growth, with an expected year-over-year increase of approximately 18%.
Stock Price Target and Consensus Rating
The current consensus on Amazon’s stock is a Strong Buy, supported by 41 unanimous Buy recommendations. The average price target for AMZN shares is $269.24, suggesting a potential upside of 16.47% from current trading levels.
As Amazon prepares for its Q3 earnings, investors will keenly watch its capacity to navigate challenges and capitalize on growth opportunities in AI and cloud services.
