4:30 p.m. UPDATE: The Amazon earnings report was released after the bell today, and the company beat on the top and bottom lines. The retail titan reported earnings per share (EPS) of $0.17 on revenue of $25.4 billion. Analysts projected a loss of $0.13 per share on revenue of $24.9 billion.
These numbers compare to a loss of $0.95 per share on revenue of $20.6 billion in Q3 2014.
Amazon Web Services (AWS) – the company’s enterprise cloud service – posted net sales of $2.1 billion, up from $1.2 billion a year ago.
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Amazon earnings for Q3 2015 come out after the closing bell today (Thursday), and traders are uncertain the online retail giant will meet expectations.
Analysts expect Amazon.com Inc. (Nasdaq: AMZN) to lose $0.13 per share on revenue of $24.9 billion. That would mark a 14.6% decline in earnings per share (EPS) from the year-ago quarter and a 21% growth in revenue.
Most of the attention in the Q3 Amazon earnings report will be on growth of the new Amazon Web Services (AWS). Last quarter, the company’s enterprise cloud service made $1.8 billion in revenue and is set to hit $7.3 billion by the end of 2015. AWS already owns 40% of the server market for app companies, according to a SaaS survey by Pacific Crest.
Amazon stock is up 79.1% this year, compared to the Dow Jones’ 3.7% fall and the S&P 500’s 2% fall. AMZN is also smashing its e-commerce peers by a significant margin. Amazon is beating eBay Inc. (Nasdaq: EBAY) – down 56.9% – and Alibaba Group Holding Ltd. (NYSE: BABA) – down 33.2% – so far in 2015.
Some investors predict Amazon earnings for Q3 will push the stock price above the $600 benchmark. After all, that’s only 6% higher than yesterday’s closing price of $555.77.
According to Money Morning Options Trading Specialist Tom Gentile, Amazon stock could jump even higher than that. Shares saw an average 15.3% gain in the days following three out of the last four earnings reports.
“We have to consider the likelihood that Amazon stock will head higher after earnings,” Gentile said. “I think the shares have a 75% chance of heading higher against a 25% chance of heading lower.”
Here’s how you can profit from those favorable odds…
How to Play AMZN Stock Now
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Gentile told Money Morning readers yesterday the best way to play AMZN stock now is with a straight call option.
Straight call options are agreements where investors have the right – but not obligation – to buy a stock at a specific price within a specific time frame. These are different from naked options because straight call options let you get out of buying the stock if it decreases in value.
A straight call option prevents you from losing big on historically profitable events like movements in Amazon stock after earnings.
“Buying a straight call option puts you a bit further into probability’s favor,” Gentile said. “We are banking on historical probability for this trade.”
“While not perfect, it’s the lifeblood of a rules-based trader. Follow the pattern. And the pattern here suggests we do something bullish.”
Gentile explains this strategy in detail here. It’s your foolproof AMZN trading strategy with the least risk, most reward, and best probability for options buyers…
Alex McGuire is an associate editor for Money Morning. Follow him on Twitter at @AlexMcGuire92.
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