Is Amazon the best large-cap stock to invest in during Q2 earnings season?

• Amazon shares corrected ahead of financial results release.
• However, the e-commerce giant maintains a strong position in the sector.
• Ahead of the key Q2 earnings report, investors expect AWS and the advertising sector to continue to drive sales.
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E-commerce giant Amazon (NASDAQ:) is set to report second-quarter earnings next week. While the stock has seen a modest pullback in recent weeks, like other big tech names, investor optimism remains high.

The company’s market capitalization topped $2 trillion this year on expectations of continued growth driven by its core e-commerce business as well as new ventures such as Amazon Ads and Amazon Web Services (AWS).

Amazon Ads has shown impressive growth, with revenue up 24% year-over-year in Q1. The introduction of ads on Prime Video is expected to further fuel this expansion.

AWS, Amazon’s cloud computing division, also remains a significant growth engine, with Morgan Stanley forecasting 18% year-over-year growth, driven by the adoption of generative AI.

The recent Prime Day event, which generated $14.2 billion in sales, has helped fuel positive sentiment around Amazon. But with expectations so high, investors will be watching closely for any signs of weakness in the company’s results.

High expectations for further growth

Forecasts predict significant year-over-year growth in Amazon’s earnings per share (EPS). If Amazon meets or exceeds the expected EPS of $1.01 and revenue of $148.5 billion, it will extend an impressive growth trend that began in the first quarter of 2023.

Source: InvestingPro

Analysts’ optimism is visible – the number of upward revisions exceeds the number of downward revisions five times.

Source: InvestingPro

This confidence is supported by Amazon’s rising free cash flow relative to its share price, which allows for sufficient interest coverage – a key factor in the current high interest rate environment.

Source: InvestingPro

Technical Analysis: Correction is developing

The technical chart reveals a corrective phase that currently supports bearish sentiment ahead of the earnings announcement. Sellers have room to further drive lower.

The first test for sellers will be the demand zone around $176 per share, a critical level marked by the largest correction in an uptrend. If sellers break through this zone, the next target will be the support level around $167.

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Reservation: This article has been written for informational purposes only; it does not constitute an incentive, offer, advice, advice or recommendation to invest, as such it is not intended to encourage the purchase of assets in any way. I would like to remind you that each type of asset is evaluated from many perspectives and is highly risky, and therefore each investment decision and the associated risk remain on the investor’s side.