Will Tech Titan AMZN Crash Like GOOG & MSFT?
This morning while catching up on the Fed’s FOMC headline news, a childhood nursery tune popped up at the back of my mind.
I thought the chorus was especially poignant and best sums up as an investor, what I need to do to navigate around the FOMC’s decision, going forward.
The tune’s chorus:
Que sera sera, whatever will be will be. The futures not us to see. Que sera sera, what will be will be.
FOMC’s conference summary:
The FOMC no longer mention and qualify its willingness to keep raising interest rates until inflation had been brought under control.
It’s tepid signal that it is done raising interest rates but made it clear that it is not ready to start cutting.
Mr Powell finally killed the “dream” by acknowledging that “a March rate cut is unlikely“ as inflation still running above their 2% target.
Looking at Wed, 31 Jan 2024, 3 composite indexes performances were “mixed” in the morning.
At around 2:45pm (purple demarcation), 45 mins into the Fed conference, all 3 indexes crashed.
This was the market “reaction” that I mentioned in my post (click to read !).
When market closed at 4pm:
DJIA: -0.82% (-317.01 to 38,150.30). This is Dow’s biggest one-day point decline since December
S&P 500: -1.61% (-79.32 to 4,845.65). This marked the worst session for the large-cap index on a percentage-point basis since September 2023.
Nasdaq: -2.23% (-345.89 to 15,164.01). This is tech-heavy index’s (a) worst day since October 2023 and (b) it’s recorded worst Fed day performance since November 2022.
ADP Non Farm Payroll:
Like the JOLTs and CB Consumer Confidence reports that did nothing to prevent market from falling on Tuesday.
The ADP non farm payroll report, came and went away as well.
US private sector employment indicated that the labor market is softening and wages as well.
For January 2024, private companies added just 107,000 new workers, below market expectations (of 145,000 jobs).
Nevertheless, it is still indicative of an expanding labour market.
At the same time, US Labour Department reported that the employment cost index (gauge the Fed watches closely for signals of inflation coming through wages), increased just 0.9% in Q4 2023, the smallest rise since Q2 2021.
Heading into the first trading day of February 2024, pre-market indicators for all 3 Composite Indexes are registering some semblance of positive vibes; after a good night rest.
Is there a possibility that Wall Street analysts realized that they have oversold their positions on the last trading day of January 2024?
$Amazon.com(AMZN)$ will be reporting its quarterly earnings on 01 Feb 2024 at the end of trading day.
Just for the record, Amazon was the 2nd-best performing FAANG stock of 2023, with its gains of +81%, coming second only to $Meta Platforms, Inc.(META)$.
In 2024, it has continued its uptrend, hitting a 52-week high on Fri, 26 Jan 2024.
Amazon Q4 Earnings Preview
According to FactSet analyst consensus:
Revenue estimates: $166 Billion, up +11.2% YoY.
Earning per share (EPS) estimates: $0.80 per share, up an eye-popping +2,500%.
Backtracking to Amazon’s Q3 2023 conference, Amazon provided Q4 revenue guidance of $160 Billion to $167 Billion.
At the time, the “future” guidance was below what the Street expected, even as Amazon’s Q3 revenues were ahead of its own guidance, as well as consensus estimates.
Bullish Forecast Ahead of Earnings
Analysts are bullish on Amazon ahead of the earnings report.
Last week, $Jefferies Financial Group Inc.(JEF)$ raised its target price to $190 from $175.
$Bank of America(BAC)$ listed Amazon as a top pick for 2024. It believes that with reasonable valuations, Amazon shares are “well positioned” for 2024.
Multiple other brokerages, including JPMorgan, Piper Sandler, Evercore ISI, Citi, TD Cowen, and Bernstein, have listed Amazon as a top 2024 pick.
Overall, Amazon has a “Strong Buy” rating from 41 of the 45 analysts covering the stock, making it the best rated FAANG stock, with a mean target price of $182.37.
This is +14.5% higher than last Friday’s closing price.
If you asked me, I think the market overreacted on Wed, 31 Jan 2024 on the aftermath of the FOMC’s press conference.
This could not have been more apparent than stocks listed on Nasdaq.
With pre-market indicators indicating investors will be returning to US market on Thursday, things seemed to be turning the corner.
If Amazon is able to match Wall Street’s Q4 estimates and taking above previews into considerations, it is very likely Amazon may not suffer the same fate like $Alphabet(GOOG)$ and Microsoft (MSFT)$.
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Do you think US market will recover or continue to fall?
Do you think Amazon will suffer the same fate as Google and Microsoft?
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