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Members of “Weekly Options USA,” Using A Weekly Call Option, Make Potential Profit Of 62%, On The Run-up To The Amazon Earnings Report.
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Sunday, April 30, 2023
by Ian Harvey
Why the AMZN Weekly Options Trade was Executed?
Amazon.com, Inc. (NASDAQ: AMZN) was scheduled to report financial results Thursday after the market closed, and it was expected that cost-cutting measures had helped profitability and cloud services sales growth is bottoming out.
Members were given the suggestion that if there is enough movement before the earnings then exit with some profit.
An alternative move was to sell half their options contracts and risk a positive outcome from the earnings report.
Amazon.com is best known for its range of e-commerce companies, its research and development into customer experience and new markets, that can drive it as a growth stock. As of April 2023, Amazon.com had a total market capitalization of more than $1 trillion, making it an appealing choice for growth investors.
Amazon has relentlessly focused on delivering exceptional customer experiences through fast and reliable delivery, a wide selection of products and easy-to-use technology. For example, Amazon Web Services, the company's cloud computing division, has become a dominant player in the market in just a few years, bolstered by a loyal customer base. Amazon has recently begun investigating the healthcare market, another potential outlet for future growth.
The AMZN Weekly Options Trade Explained.....
Obviously the results will vary from trader to trader depending on entry cost and exit price that was undertaken.
** OPTION TRADE: Buy AMZN MAY 05 2023 110.000 CALLS - price at last close was $2.29 - adjust accordingly.
Obviously the results will vary from trader to trader depending on entry cost and exit price that was undertaken.
Entered the AMZN Weekly Options (CALL) Trade on Thursday, April 27, 2023, at 9:41, for $3.15.
Sold the AMZN weekly options contracts on Thursday, April 27, 2023, at 1:46, for $5.10; a potential profit of 62%.
Some members may still be holding AMZN weekly options contracts; therefore, we are looking for the Amazon stock to move upwards next week.
Don’t miss out on further trades – become a member today!
The Actual Earnings Report…..
Amazon's stock went on a roller-coaster ride following its earnings report on Thursday afternoon. The company's better-than-expected first-quarter financial results came in well ahead of analysts' expectations, initially causing shares to rise.
But, management's commentary during the company's earnings call on Thursday afternoon about a significant slowdown in its cloud revenue in April ended up spooking investors. By the time the market digested the report, the stock had fallen about 4% on Friday.
Amazon, or Amazon.com, is the world's largest and leading portal for eCommerce. It was founded by Jeff Bezos, incorporated in 1994, and later went public in 1997. The company is headquartered in Seattle, Washington, and is a member of the influential FAANG group of stocks. When it comes to stocks, Amazon is proof that small companies can do big things; the AMZN stock price was pennies when it was first listed and now it trades well over $100 (split adjusted) per share.
The company is not a true retailer nor a pure-play manufacturer but in the business of connecting consumers and merchants together. The website was first created as a means of selling books at a discount but it has since grown to include most verticals in the retail sector. A few of the products the company does manufacture are the Kindle and Fire Tablets, Fire TVs, and smart home devices like Echo. Echo is powered by an AI personality named Alexa which can take vocal commands from its users.
Today, Amazon operates in three segments including North America, International, and Amazon Web Services. The first two segments are the core retail business while Amazon Web Services includes a host of Internet-related services for consumers and businesses alike. A little-known fact is that Amazon Web Services is as important to the function of the Internet as Google because of the infrastructure it provides and it hosts so many business websites.
Services provided by Amazon for merchants include listing, fulfillment, and advertising as well as subscriptions. Services provided by Amazon Web Services include cloud computing, storage, database maintenance, analytics, machine learning, and even artificial intelligence. In regard to the company's operations, Amazon Web Services is the smaller of the three segments but is a fast-growing and well-established part of the business that has had a positive influence on the AMZN stock price.
Among the many ancillary services provided by Amazon is Kindle Direct Publishing. This is a cloud-based service that enables writers and publishers to publish their works directly in the Kindle Store. Kindle, if you are unaware, is an Internet-connected tablet designed for reading books but also streams other forms of entertainment. Amazon also develops and publishes its own media content that is available via Kindle or the Amazon App that can be found on most smart TVs.
Amazon is also a disruptor, moving into new digital markets whenever it thinks it can make a profit. The move into streaming is only one example, another is a push into healthcare. Amazon Prime is another disruptive move and is a subscription service that entitles members exclusive access to Amazon services.
Amazon's stock price can be affected by factors including the pace of revenue growth, profitability, growth in the AWS segment, and any stock splits that may occur. The Amazon share price was impacted by splits 4 times between the IPO in 1997 and June 2022 and additional splits should be anticipated. The forecast for Amazon stock, splits aside, is for steadily increasing price action punctuated by pullbacks, corrections, and consolidations. While there is competition for Amazon, this company is entrenched and will stand the test of time because eCommerce is the way businesses thrive in today's markets.
Catalysts for the AMZN Weekly Options Trade…..
E-commerce and cloud computing giant Amazon reports earnings Thursday, April 27 after the market close. The precarious nature of the current market regime makes this report quite significant.
Of particular interest to investors will be revenue numbers in AWS Cloud, as it has been a major driver of growth for Amazon. Its primary competitors in the cloud space, Microsoft MSFT, and Alphabet GOOGL reported earnings Tuesday evening, and provided interesting insights into what to expect from AMZN.
Amazon has been on a tear, rallying 25% YTD, considerably better performance than the S&P 500. However, investors shouldn’t forget how painful 2022 were for AMZN. The stock price more than halved in 2022, leaving Amazon shares still down almost -40% over the last two years, well below the performance of the index.
Considering the forecasted weakness in business and consumer spending broadly, analysts still have fairly strong expectations for Amazon. Sales are projected to grow 7.2% YoY to $125 billion for the current quarter.
Amazon is expected to beat estimates by 11.5% for earnings. Last quarter Amazon really blew away analyst expectations and reported earnings that were 40% above estimates.
In the Q4 report, Amazon’s cloud computing segment reported 20% growth YoY, below Q3’s 28% growth, and Q2 33% growth. While 20% growth in sales is nothing to scoff at, the deceleration is an extremely important development, as AWS is a major engine for growth. Because of the shifting macroeconomic environment, firms have clearly tried to cut some of their cloud spending.
Amazon is winding down its health-focused Halo devices and membership as the tech giant continues to cut costs.
The company told customers on Wednesday that it will issue refunds to anyone who purchased Amazon Halo devices in the past year. Refunds will also be issued to customers who have unused prepaid Halo subscriptions fees.
Amazon introduced its Halo line in 2020 with the launch of a fitness-tracking wristband that worked alongside a subscription service and smartphone app. Since then, it has expanded the line to offer more wearables and a bedside device that tracks sleeping patterns.
“While we are proud of what we built, we recently made the difficult decision to stop supporting Amazon Halo effective July 31, 2023,” the company said in a blog post.
Halo is the latest unit to get axed as by Amazon as it works to reduce costs amid worries about the wider economic environment and sluggish online sales. Among other cuts, the company has shuttered its hybrid virtual, in-home care service Amazon Care, the video calling device Amazon Glow and scaled back its Scout delivery program in recent months.
Amazon is currently trading at a one-year forward price to sales ratio of 1.9x, which is well below its 10-year median of 2.7x and below the broad market average of 3.6x. This is a compelling valuation for the tech giant.
Although Amazon is best known for its e-commerce sites, cloud computing is the company's primary profit driver. Amazon Web Services (AWS) generated a whopping $22.8 billion in operating income in 2022, up from $18.5 billion in 2021. That was despite significant macroeconomic challenges, including inflation and recessions fears, which drove many businesses to slow their technology investments.
Inflation is moderating and the economy will eventually strengthen, both of which should increase Amazon's cloud profits. But AWS is set to enjoy an even more powerful growth catalyst in the coming years: artificial intelligence.
Amazon's new service, Bedrock, is designed to help customers easily build and scale generative AI applications. Generative AI is cutting-edge technology made popular by apps like ChatGPT, which can produce text, images, and other novel content from user prompts. Bedrock provides access to AI models, including Amazon's new Titan models, as well as those offered by Stability AI, Anthropic, and other providers. Additionally, Amazon's custom-designed Trainium and Inferentia2 chips can reduce the cost of training AI models and running generative AI workloads on AWS, thereby making the technology accessible to more people.
Amazon already has over 100,000 customers for its AI services. Amazon management said it believes generative AI will have a "profound impact across industries" and power "a technological revolution that will continue for decades to come." Amazon intends to lead this revolution, and it's investing aggressively to advance this game-changing technology.
Automation should further enhance Amazon's profitability. The robotics market could grow to a staggering $9 trillion by the end of the decade, up from $70 billion in 2022, according to Ark Investment Management. Amazon is also a powerhouse in this booming industry.
Ark notes that the adoption of industrial robots tends to accelerate during economic calamities, such as the 2002 dot-com crash and the 2008-2009 financial crisis. This somewhat counterintuitive trend is likely to persist. The reason is simple: automation can reduce labor costs.
Moreover, technological advancements are driving a rapid improvement in robot performance, so much so that Ark believes Amazon could begin to add more robots to its warehouses than people in the coming years.
So Amazon has an intriguing choice: sell its leading robot technology to other businesses or keep it in-house and enjoy the corresponding productivity gains. Either option should help to drive Amazon's profits higher in the decade ahead.
Amazon also stands to benefit from the long-term growth of the online retail industry. Yet investors appear to be underestimating just how valuable this market could be, according to analysts at the investment firm run by JPMorgan Chase. The firm recently named Amazon its best internet stock idea.
Analyst Doug Anmuth acknowledged that macroeconomic issues are weighing on Amazon's results. But he expects e-commerce companies to return to their historical norm of wrestling away market share from brick-and-mortar retailers. He also sees Amazon's profit margins improving, due in part to its cost-cutting initiatives. All told, Anmuth sees Amazon's stock rising more than 30% to $135 per share.
As Anmuth noted, CEO Andy Jassy is working to cut expenses throughout Amazon's retail operations. Jassy's plan includes job cuts and a slower pace of expansion for the company's massive fulfillment network. While painful in the short term, these measures should make Amazon more efficient and, by extension, profitable.
In a letter to shareholders, Jassy noted that roughly 80% of global retail sales still occur in physical stores. That leaves plenty of room for growth for the e-commerce giant. And the additional sales Amazon earns should come with higher margins, thanks to its efficiency-boosting efforts.
According to the issued ratings of 43 analysts in the last year, the consensus rating for Amazon.com stock is Moderate Buy based on the current 2 hold ratings and 41 buy ratings for AMZN. The average twelve-month price prediction for Amazon.com is $143.75 with a high price target of $270.00 and a low price target of $106.00.
If Amazon can retake the pre-Covid highs ~$110 level, it should be an extremely bullish signal for the stock. Additionally, the $100 level seems to be a psychological level of interest, and so long as price holds above there, investors can remain bullish.
Amazon has a market cap of $1.08 trillion, a PE ratio of -393.53, a P/E/G ratio of 3.95 and a beta of 1.26. The stock’s 50-day simple moving average is $98.35 and its two-hundred day simple moving average is $97.54. Amazon.com has a 1 year low of $81.43 and a 1 year high of $146.57. The company has a current ratio of 0.94, a quick ratio of 0.72 and a debt-to-equity ratio of 0.46.
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