As I type this the “markets” are now reacting to Amazon™ earnings report.
The question that seems to be both asked and answered is…
Q: Was it good?
A: It’s fantastic!
And with that the share price rocked up faster than a Bezos Blue Origin™ rocket-ship. Yet, there is a qualifier to that “fantastic” which is this…
“Fantastic” meaning it beat on all metrics above and beyond all previous?
“Fantastic” as in it wasn’t a bad one that would send everything more towards the ocean floor rather than blue sky territory?
Hint: It’s more of the latter than the former.
Yes the earnings report was good, beating on operating income and its cloud expectations (AWS). But revenue?
No, and guidance was more akin to a Rorschach test than anything meaningful.
Amazon’s growth may now be passed its prime. (Sorry, it just wrote itself.)
Yes the share price spiked skyward 18% on the news, but that spike appears to be nothing more than a reaction to such a heavy bias for both shorts and others going into this report primed by Facebook™ while also biased to Amazon’s prior two back-to-back disappointing reports.
Most of the move, currently, is being attributed in that Amazon is going to raise its membership fee for Prime™. That may be true, however, history in this space has shown any hike in fees has been a result for stock prices being mercilessly hammered (see Netflix™ for prior examples) in a sell first – verify potential gains later. So that theory doesn’t appear to be as on as solid footing as many might imply. All my conjecture, of course.
Below is a chart of Amazon after hours showing where the stock price currently sits. It has come off a bit from the initial knee-jerk 18% and now sits at 15%. Quite the move any way you slice it, however, what I would like to draw your attention to is that with such a reversal – It’s still well under the break even mark of 2021. A distinction I feel is not insignificant in the larger picture of things. To wit:
So here’s the now overarching question going into tomorrow (Friday) morning…
The whipsawing market makers and others have bore from both Amazon and Facebook that have happened in the after-hour markets is staggering. The issue that makes matters even more precarious is that the moves in both of these have to be negated using very ill-liquid markets, where option hedges and more are impossible, meaning, trying to hedge the risk of just what happened in Amazon, directly, after an event such as Facebook using only the futures market, is something akin living through two back-to-back Cat-5 hurricanes.
Now, add to that, right before the “markets” open (aka still in the overnight session mode) there is what just might be a monster of a bad employment report at 8:30am EST making for an approaching perfect storm. Here’s why…
If for some reason that report does print as bad as the whisper numbers are touting (some are calling for a negative print, meaning, no jobs but actually losses) things could get real ugly, real fast.
However, with that said, it is very possible that the rumor-mill via all the known players (i.e., Wall Street and the political) could be rumoring that it’s gonna be bad, real bad. Then, the print comes in somewhere that seems like manna from heaven (not good, but not really bad) and the overall “markets” get a short covering relief rally mimicking the size and scope of Amazon’s rocket ride. It’s been a common move since there’s been reports and markets.
As always, we shall see. But that’s where we are.
Of course, we’ll break it all down regardless on tomorrow’s show. See you then.
© 2022 Mark St.Cyr
Note: This is not trading or investing advice of any sort. This commentary is for “big picture” discussion purposes only. Please read, or re-read the “About This Site” page for any questions or clarifications.