Amazon turns bullish on forecast of strong holiday sales

The e-commerce and cloud computing company Amazon Inc. (NASDAQ: AMZN) is expected to report its fiscal 2016 third-quarter results on Thursday, after market close.

During the past two quarters, the company had surpassed the estimate of analysts by a margin of more than 50%. Reflecting the investors’ confidence in the performance of the company, the share price has risen by nearly 4% to $838 in the past two weeks. Will the stock rise further or tank? A quick look at the developments in the company will enable us to speculate with a better probability of success.

Before we discuss where the share price is heading for, let us have a quick look at the second-quarter results. Amazon positively surprised the market by reporting Q2 2016 non-GAAP revenue of $1.78 per share on revenue of $30.4 billion. The analysts’ had expected the company to post earnings of only $1.11 per share on revenue of $29.5 billion.

For the quarter ended September, Amazon has given a revenue guidance of between $31 billion and $33.5 billion. The analysts’ anticipate revenue of $31.6 billion. As it can be understood, the company has given an optimistic outlook. The analysts forecast Q3 2016 earnings of $0.86 per share. It can be noted that the Q3 2015 earnings reported by the company were only $0.17 per share.

Amazon stated that it had record sales on July 12. Commenting further, the company said that relative to the Price Day 2015, the quantum of worldwide orders increased by 60%. Amazon also revealed that the orders from the third-party sellers with Prime Day deals almost tripled. While Amazon did not provide the exact sales figures, it can be judged that the sales on that particular day would certainly have a positive impact on the topline of the company.

Jeff Bezos, the CEO of Amazon stated that the company is making good progress in India. Furthermore, to capitalize on the stupendous response from the Indian customers, the company has introduced AWS (Amazon Web Services) and Amazon Prime (same day delivery in most cities based on an annual subscription of about $8).

Amazon Web Services

To cater to the rise in demand during the holiday season, the company has decided to employ 120,000 seasonal workers in the US, up 20% more than last year.

The US National Retail Federation is forecasting a 3.6% increase to $655.8 billion in the holiday sales this year. The online sales are expected to rise by 7% to 10%. So, based on the above facts, we believe that the company will once again give a pleasant surprise to the market later this week.

The price chart reveals that the stock has found support at 812. The stochastic is rising, while the Chaikin money flow indicator has turned positive. This indicates that money has started flowing into the stock or long positions are built up with an increase in the momentum.

So, to swim with the tide, a one touch call option can be bought from a binary broker of choice. To decrease the risk, the trader should look for a target price lower than $850 and an expiry date in the final week of November.

---