Buy Amazon Stock Ahead of Q2 Earnings Despite Possible Tech Pullback?

Amazon AMZN is scheduled to report its second quarter financial results on Thursday, July 30. The question is can the e-commerce and cloud computing firm live up to the expectations, with AMZN stock up roughly 60% since the market’s March lows.

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The Seattle powerhouse is all but tailor-made to outperform during the coronavirus and the broader social distancing and stay-at-home push that could last some time. Back in March, Amazon announced plans to hire an additional 100,000 employees in the U.S. to deal with increased demand. This highlights its ability to expand and shine as businesses around the U.S. and the world were forced to close.

Amazon’s ability to meet demand amid the pandemic could be key, as its traditional rivals in retail such as Walmart WMT and Target TGT showcase their e-commerce and delivery offerings.

Outside of retail, which also includes its Amazon’s Prime-heavy subscription revenue, the company’s AWS cloud computing division should be able to shine as businesses and consumers adapt to a new environment.

Of course, AMZN’s cloud business was already booming before Covid-19 and it remains a giant within the growth industry alongside Microsoft MSFT. Plus, Amazon’s fastest-growing segment has been its digital ad-heavy “Other” unit that has helped it become the third-largest player behind only Google GOOGL and Facebook FB.

Amazon Prime video could also benefit because movie theaters are likely one of the last things that will come back. And more exposure might help the millions of Prime users who favor other services such as Netflix NFLX and Disney+ DIS appreciate Amazon’s streaming offering.

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Amazon stock has been lumped in with the stay-at-home stars such as Zoom ZM. And AMZN is up over 60% in 2020, against the S&P 500’s roughly sideways movement. But Amazon is obliviously much more than a coronavirus star. It’s a stock that has topped all of its FAANG peers over the last three years, as part of its massive decade-plus run.

AMZN has cooled off recently, roughly matching the S&P 500’s 4% climb in July. And it hovered about 6% below its 52-week highs on Friday.

Looking forward, our Zacks estimates call for Amazon’s second quarter revenue to jump 28%. This would beat Q1’s 26% top-line expansion and mark its strongest period since Q3 of 2018.            

Despite the projected revenue growth, increased costs are expected to eat into Amazon’s earnings. The company’s adjusted Q2 EPS figure is projected to fall 66% to $1.75 per share. Yet, its third quarter EPS is still expected to climb 20%.

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