Summary
- Amazon.com, Inc. stock has shown volatility post-Q1, but a reversal is already being seen ahead of Q2 earnings on August 1.
- Profitability trends related to opex dynamics impact stock performance, with a focus on balancing SG&A and R&D.
- Despite concerns, I’m confident of my Buy recommendation due to this masterful balancing act between expenditure and profitability.
Amazon.com, Inc.’s (NASDAQ:AMZN) Q1 performance was received positively by the market, but ever since then, the stock has shown quite a bit of volatility. At one point, it repeatedly bounced off the $200 resistance level, but the resistance wouldn’t break, and since then, the stock has exhibited a clear downtrend that’s showing a reversal ahead of Q2 earnings on August 1. However, I hope to argue that investors don’t need to worry about the stock going up or down in shorter time-intervals. There are much bigger things at play.
In my initiating coverage on Amazon, I plan to detail how the dynamics in capex and opex (primarily opex) affect its bottom-line profitability, and what investors should expect for Q2 and beyond. Clear patterns emerge as we assess these numbers over the past several years. Hopefully, investors can sleep better at night knowing that the apparent irregularities and volatility in the stock price are actually highly correlated to some of these key metrics. My recommendation is a clear Buy before earnings, and I’ll reason out why I don’t really care which way the stock moves after the August 1 earnings release.
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