Amazon Stock Retreats Slightly Ahead of Results; Fast-growing Super Micro will also report

A sale for Metaplatforms (META) cast a shadow over the first quarter earnings season. Now attention turns to the coming results Amazon.com (AMZN) stock, as well as Super microcomputer (SMCI) And Apple (AAPL).

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Amazon shares are under selling pressure even as profits are expected to more than double, but sellers have hit Super Micro hard ahead of the report.

Super Micro, a maker of artificial intelligence hardware, has made a habit of pre-announcing strong results in recent quarters. However, Wall Street didn’t get a preliminary outlook from the company this time. That raises concerns about its tepid first-quarter report, even though Super Micro is showing growth on par with other AI stocks Nvidia (NVDA).

Analysts polled by Zacks Investment Research expect Super Micro to report adjusted earnings of $5.97 annually, up 266% year over year, with revenue up 220% to $4.11 billion. Super Micro reports Tuesday after the closure.

Mild pullback for Amazon shares

Amazon’s withdrawal was more orderly than Super Micro’s. Super Micro shares are more than 30% below their highs; Amazon is only about 10% below its peak.

Shares of Amazon 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 rose 27% to $14.7 billion. In January, Amazon started showing ads on Prime Video.

Revenue at Amazon Web Services, the company’s cloud computing segment, rose 13% to $24.2 billion, accounting for 14% of total revenue. Web services growth accelerated slightly compared to the third quarter.

Earlier this year, Amazon dropped its acquisition plans I robot (IRBT), which makes robot vacuum cleaners, for $1.4 billion, thanks to intense scrutiny from European regulators.

For the first quarter, analysts expect adjusted earnings of 82 cents per share, an increase of 164% compared to the same quarter last year. Revenue is expected to rise 12% to $142.5 billion.

Other high-profile tech names on the earnings calendar include Apple (AAPL) And Advanced micro devices (AMD). But sellers have dictated the action in both stocks in recent weeks.

Apple has been on a downward trend since late January due to declining demand for iPhones. AMD, meanwhile, is more than 30% below its all-time high, despite strong annual profit expectations. Full-year profits are expected to rise 20% this year, while growth will accelerate in 2025 with a 68% increase.

View two Leaderboard stocks

It’s a busy earnings week for the top-performing asset managers in the IBD 50, such as Apollo global management (APO), Blue Owl Capital (OWL) And Ares management (ARES).

How to know when it’s time to sell your favorite stocks

Apollo Global is also a member Scoreboard and reports together with Ares Management early Thursday. Blue Owl results are expected after the close on Wednesday.

Apollo Global is less than 5% off its high with a relative strength line near the highs, while Ares is near the top of a flat base with an entry of 139.48. Blue Owl Capital is holding support at the 50-day line as it remains within buy range from an 18.33 buy point.

Another Leaderboard member, Generac (GNRC), reports Wednesday before the opening. The company is best known for its power generators. But late last year, Generac made a minority investment in it Wall box (WBX), a provider of electric vehicle charging and energy management solutions.

Generac looks set to turn around after earnings declines in 2022 and 2023. Analysts expect full-year profits to rise 15% this year, with growth accelerating to 27% in 2025.

Generac initially scored an entry of 132.50. Now it’s looking at an alternate entry of 140.34 with an accumulation/distribution rating of A+, the highest possible. The rating was helped by several above-average volume price increases in recent weeks.

Other companies that will report earnings that still show technical strength include Quanta services (PWR), Ingersoll Rand (IR) And Flowserve (FLS).

Options trading strategy

A basic earnings options trading strategy (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 call option trade recently looked like for Amazon stock.

First, identify the top-rated stocks with a bullish chart. Some may settle on a good foundation early on. Furthermore, some may have already broken out and are receiving support for their 10-week lines for the first time. And a few can trade close to highs and refuse to give up much ground. Avoid extended shares that are too far beyond the appropriate entry points.

A call option is a bullish bet on a stock. Put options are bearish bets. One call option contract gives the holder the right to buy 100 shares of a stock at a certain price, known as the strike price.

Once you have identified a bullish setup in the earnings calendar, you can check the strike prices on your online trading platform, or at cboe.com. Also make sure that the option is liquid, with a relatively small spread between the bid and ask price.

Look for a strike price just above the underlying stock price – that’s out of money – and check the premium. Ideally, the premium should not exceed 4% of the underlying share price at that time. In some cases, an in-the-money strike price is okay, as long as the premium is not too expensive.

Choose an expiration date that suits your risk objective. But keep in mind that time is money in the options market. Shorter expiration dates will yield cheaper premiums than dates that are further away. Buying time on the options market entails higher costs.

Trade Amazon stock options

When Amazon’s stock was trading around 173, a slightly out-of-the-money weekly call option with a strike price of 175 and an expiration date of May 3 yielded a premium of about $5.85 per share per contract. That was 3.4% of the underlying share price at the time.

One contract gave the holder the right to purchase 100 shares of Amazon stock at 175 per share. The most 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 is found by adding the at-the-money call premium and a put premium for the May 3 contract.

Follow Ken Shreve on X/Twitter @IBD_KShreve for more stock market analysis and insight.

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