A sellout for Metaplatforms (META) cast a shadow over the first quarter earnings season. Now attention turns to the upcoming results for Amazon.com (AMZN) stock, as well Super microcomputer (SMCI) and Apple (AAPL).
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Amazon shares have come under selling pressure even as profits are expected to more than double, but sellers hit Super Micro hard ahead of the report.
Super Micro, an artificial intelligence hardware maker, has made a habit of pre-announced strong results in recent quarters. This time, however, Wall Street did not receive a preliminary outlook from the company. That raises concerns about a tepid first-quarter report, even though Super Micro is posting growth on par with other AI stocks Nvidia (NVDA).
Analysts surveyed by Zacks Investment Research expect Super Micro to report adjusted earnings of $5.97 a year, up 266% from a year earlier, and revenue to rise 220% to $4.11 billion U.S. dollar. Super Micro reports on Tuesday after the market closes.
Slight decline in Amazon shares
Amazon’s withdrawal was more orderly than Super Micro’s. Super Micro stock is more than 30% off its peak; Amazon is only about 10% away from its peak.
Amazon shares rose sharply in early February after the company reported strong fourth-quarter results. Revenue growth accelerated from the third quarter, rising 14% to $170 billion. Additionally, advertising revenue increased 27% to $14.7 billion. In January, Amazon will begin running ads on Prime Video.
Revenue from Amazon Web Services, the company’s cloud computing segment, rose 13% to $24.2 billion and accounted for 14% of total revenue. Web services growth accelerated slightly starting in the third quarter.
At the beginning of the year, Amazon abandoned its takeover plans I robot (IRBT), which makes robot vacuum cleaners, for $1.4 billion amid intense scrutiny from European regulators.
For the first quarter, analysts expect adjusted earnings of 82 cents per share, up 164% from the year-ago quarter. Sales are expected to rise 12% to $142.5 billion.
Other high-profile technology names on the earnings calendar include: Apple (AAPL) and modern micro devices (AMD). But in recent weeks, sellers have dictated events in both stocks.
Apple has been trending downward since the end of January due to declining iPhone demand. AMD, meanwhile, is more than 30% from its peak despite strong annual profit estimates. Full-year profits are expected to rise 20% this year, with growth accelerating to 68% in 2025.
Watch two leaderboard stocks
It’s a busy week of earnings for the best-performing asset managers in the IBD 50, such as Apollo Global Management (APO), Blue Owl Capital (OWL) and Ares Management (ARES).
Here’s how to know it’s time to sell your favorite stocks
Apollo Global is also a member of the leaderboard, reporting early Thursday along with Ares Management. Blue Owl’s results are expected after the market closes on Wednesday.
Apollo Global is less than 5% from its peak, with a relative strength line near highs, while Ares is near the top of a flat base with an entry of 139.48. Blue Owl Capital holds support at its 50-day line as it remains in buy range from an 18.33 buy point.
Another member of the leaderboard, Generic (GNRC), reported on Wednesday before the opening. The company is best known for its power generators. But late last year, Generac made a minority investment Wallbox (WBX), a provider of charging and energy management solutions for electric vehicles.
Generac looks set for a turnaround after reporting earnings declines in 2022 and 2023. Analysts expect full-year earnings to rise 15% this year, with growth accelerating to 27% in 2025.
Generac initially managed an entry of 132.50. Now targeting an alternate entry of 140.34 with an Accumulation/Distribution Rating of A+, the highest possible. The valuation was supported by several above-average volume price increases in recent weeks.
Other companies set to report earnings that still show technical strength include: Quanta Services (DWR), Ingersoll Rand (IR) and Flowserve (FLS).
Options trading strategy
A basic options trading strategy that focuses on income – using call options – allows you to buy a stock at a predetermined price without taking on much risk. Here’s how the options trading strategy works and what a recent call options trade looked like for Amazon stock.
First, identify the highest valued stocks using a bullish chart. Some may already be establishing solid early-stage bases. Additionally, others may have already broken out and are receiving support at their 10-week lines for the first time. And some may be trading closely near highs and refusing to give up much ground. Avoid extended holdings that extend too far beyond the correct entry points.
A call option is a bullish bet on a stock. Put options are bearish bets. A call option contract gives the holder the right to purchase 100 shares of a stock at a specific price, called the strike price.
Once you have identified a bullish setup on the earnings calendar, check the strike prices on your online trading platform or on cboe.com. Also, make sure the option is liquid and has a relatively narrow spread between the bid and ask prices.
Look for a strike price that’s just above the underlying stock price – that’s out of the money – and check the premium. Ideally, the premium should not exceed 4% of the respective underlying share price. In some cases, an in-the-money strike price is fine as long as the premium isn’t too expensive.
Choose an expiration date that fits your risk goal. However, remember that time is money in the options market. The premiums are cheaper for shorter due dates than for later due dates. Buying time in the options market involves higher costs.
Amazon stock options trading
When Amazon stock was trading at about 173, a slightly out-of-the-money weekly call option with a strike price of 175 and expiration on May 3 carried a premium of about $5.85 per share per contract . That was 3.4% of the underlying share price at the time.
A contract gave the holder the right to buy 100 shares of Amazon stock at 175 per share. The maximum amount that could be lost was $585 – the amount paid for the 100-share contract. To break even, Amazon would have to rise to 180.85, taking into account the premium paid.
The expected move in the options market for Amazon stock, based on the at-the-money strike price of 172.50, is about 14 points up or down. This comes from adding the at-the-money call premium and a put premium for the May 3 contract.
Follow Ken Shreve on X/Twitter @IBD_KSreve for further stock market analysis and insights.
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