• Amazon is forecast to announce another round of strong results

• But valuations suggest it remains expensive compared to its peers

• Results are scheduled for Thursday, after Wall Street’s closing bell

Another round of stellar results?

Starting as an online bookstore, Amazon is now one of the world’s largest and most diversified firms, with its current businesses including selling all kinds of goods, streaming services, cloud computing and even health care. The company has been growing rapidly in recent years, but the broader macroeconomic outlook and higher interest rates around the globe have put downside pressure, not only to Amazon’s stock, but all the high-growth tech firms, perhaps as investors have begun seeing dimmer growth prospects and thereby considering extreme valuations as expensiveness instead of present values of future growth opportunities.

With all that in mind, those interested in Amazon’s stock are likely to keep their gaze locked on the firm’s earnings release on Thursday, after Wall Street’s closing bell. The e-commerce giant is expected to announce earnings per share (EPS) of $0.58, which would mark a slide compared to the $0.65 number reported in Q2, but still a staggering 241% jump from Q3 2022. Revenue is seen growing 11.28% y/y to 141.44bn, which would be an acceleration from last quarter’s 10.85%.

AWS to enter the spotlight

Although the forecasts are promising, investors may not base their decisions solely on those two metrics. With the firm’s cloud service, Amazon Web Services (AWS), holding the lion’s share in the global cloud market, updates on that front may attract special attention. The service includes computing storage, database, analytics, as well as artificial intelligence (AI), with the firm investing up to $4bn in Anthropic, the company behind its AI assistant Claude.

Although AWS is the largest cloud provider globally, it has recently struggled, growing far slower than its two primary competitors, Alphabet’s Google Cloud and Microsoft’s Azure, in Q2. Therefore, market participants may look for clues as to whether the investment in Anthropic has the potential to boost AWS sales.

What about healthcare?

Another service that may be worth paying attention to is Amazon’s healthcare provision. Amazon entered the sector in 2018 with the acquisition of an online pharmacy, PillPack, and since then it has expanded its offering by launching Amazon Clinic that connects customers with doctors and nurses through video and messaging.

Even though the firm’s dive into the healthcare sector is still at its early stages, there is no doubt that the resources for making larger investments are there, and Thursday’s results may provide more insights on the giant’s expansion plans.

Amazon looks expensive compared to its peers

Amazon appears to be the second most expensive company within the ‘Magnificent 7’ group, with a forward price-to-earnings ratio (P/E) of around 42x, more than double the forward P/E ratio of the S&P 500 of 18.3x, but well below its own 10-year moving average.

On top of that, Amazon is holding the fifth place in terms of year-to-date performance, which means that should Thursday’s result come in on the positive side, there may be investors interested in adding more of this stock in their portfolios despite its relatively high valuation compared to its peers. Nonetheless, the opposite may hold true as well. With the firm reporting stellar results for Q2, disappointing figures this time around may prompt investors to massively sell and seek cheaper alternatives.

Technical picture is not that bright

From a technical standpoint, Amazon is trading below the prior uptrend line taken from the low of March 13 as well as below the downward sloping line drawn from the high of September 14. Although this paints a relatively negative picture, the stock is still trading above its 200-day exponential moving average (EMA).  Thus, a break below the crossroads of that EMA and the 124.00 key support zone may be needed to signal a full-scale bearish reversal. Such a dip may allow declines towards the low of May 23 at around 114.00.

For the outlook to somewhat brighten again, Amazon may need to climb back above the peak of October 12, at around 134.40, thereby confirming the break above the aforementioned downward sloping line and a higher high on the daily chart.