With big-name US stocks like Amazon (NASDAQ: AMZN), so much depends on quarterly results. In this case, Q2 figures are due on 29 July, so what might they do for the Amazon share price?
The global pandemic and the 2020 stock market crash didn’t do Amazon any harm at all. In fact, the upswing in online shopping while people were locked-down gave it a very nice boost. Even in 2021, Amazon shares have gained 14% to date. That has come mostly since an upswing started in June, in advance of the quarterly numbers. And it does suggest investors are expecting something good.
Trading platform provider IG has pointed out that the analyst consensus on Amazon at Yahoo Finance has been improving. The earlier Q2 EPS forecast of $9.54 has been beefed up to $12.22. IG reckons that “if the tech giant can match last quarter’s stellar $15.79 results it’ll have already beaten estimates comfortably.”
It added: “Revenue has been on a consistent climb, a theme expected to persist and aided by Prime Day held earlier this year (as opposed to Q4 2020, and Q3 prior).” IG reckons Q3 “will also be of great importance“, being the first quarter without Jeff Bezos as boss. I don’t expect it to make a great deal of difference, mind, as Amazon looks increasingly like a well-oiled machine that can just keep on going.
Forecasts and sentiment
What about forecasts for the full year? Estimates put earnings at around $72 per share, a healthy improvement on last year’s $52.56. If Thursday brings any indications that the company is on track for that kind of result, I reckon the Amazon share price might well take another step upwards.
Looking at individual investors, IG tells us that “When it comes to sentiment amongst IG clients, it has been a consistent extreme buy bias, usually above 90%.“
As for IG’s clients trading in Amazon shares, 94% of them have long positions, with only 6% selling short. And what little shorting exists is declining. Does that add to the likelihood that Amazon shares will gain in value once the figures are out? I think it might well do.
Amazon share price valuation
So will I rush to my broker and buy Amazon shares before the world sees how Q2 went? Well, there’s one thing that always makes me gulp when I look at Amazon and other Nasdaq shares, and that’s valuation. We’re seeing a trailing P/E of 69. If 2021 forecasts prove accurate, that would drop to 50.Â
US investors don’t seem to worry about sky-high valuations like these. But I’m an old Englishman brought up on FTSE 100 valuations, where even a P/E getting on for around 20 makes me a bit twitchy. The risk of overvaluation keeps me away from Amazon, and I fear any quarterly shortfall will send the price diving.
It seems, though, that my Motley Fool colleague Edward Sheldon does not share my cowardice in the face of Nasdaq valuations. In any case, I suspect the Q2 results will be fine, and the Amazon share price is likely to end the week ahead.