Big Tech’s Big Break

Amazon is the latest tech giant to report earnings, flailing wildly after the bell as investors digested mixed third-quarter results. 👀

The company’s adjusted earnings per share of $0.94 topped the $0.58 expected, as did revenues of $143.1 billion ($141.4 expected). Advertising was a bright spot, with revenues of $12.1 billion vs. estimates of $11.6 billion.

However, Amazon Web Services revenue of $23.1 billion missed expectations by $0.10 billion. Although the segment widened its operating profit margin, 12% revenue growth lagged Microsoft Azure’s 29% and Google Cloud’s 22%. Analysts are concerned the slowing revenue growth could signal market share loss to its largest competitors. 🔻

When asked by reporters whether the unit’s growth had bottomed in the current quarter, Amazon’s CFO responded, “I wouldn’t quite characterize it that way.” While its customers’ appetite for cloud services remains robust, there are several headwinds facing the entire sector right now. That could mean new work being pushed out to future quarters as companies navigate the economic uncertainty. However, during the earnings call, he “talked up” recent cloud business deal flow that should support fourth-quarter numbers. So, investors received mixed signals at best here. 🤷

The recovery in its core e-commerce business continued, with revenues rising 7% YoY vs. 4% last quarter. Promotional events like “Prime Day,” its “biggest ever” sale, were needed to spur consumer demand in the current environment. Although sales rose 13% YoY in the third quarter, executives’ forecast for fourth-quarter sales of $160 to $167 billion indicates roughly 10% growth. The midpoint of that range is also below analyst expectations of $166.6 billion. 👎

Additionally, Amazon remains focused on cost optimization as it navigates the slower growth environment. It’s laid off 27,000 employees over the last year, also closing down many of its unprofitable initiatives. ✂️

Given Amazon had sold off over the last few days, it was able to take the slowing cloud growth in stride. With that said, it’s clear that investors are focused primarily on that segment of the business, given e-commerce is expected to remain challenged, and advertising is still a smaller segment.

$AMZN shares are up 2% after the bell, offsetting regular-session losses. 🔺

Roughly four months after we last discussed Siemens Energy, the company is back in the news. 📰

Before getting into today’s news, the energy giant made headlines in June after scrapping its profit forecast and warning that major setbacks at its wind turbine subsidiary (Siemens Gamesa) could last years. That sent shares tumbling 37% in about two days, also pressuring Siemens AG, which owns about 35% of the company.

Now, the stock has fallen another 35% after requesting guarantees from the government to continue its long-term projects. 🆘

Its statement said, “Considering this requirement, the Executive Board is evaluating various measures to strengthen the balance sheet of Siemens Energy and is in preliminary talks with different stakeholders, including banking partners and the German government, to ensure access to an increasing volume of guarantees necessary to facilitate the anticipated strong growth.”

Reports indicated that the company is looking for 15 billion euros in guarantees, but executives did not comment on the exact details. The market was a bit confused, however, since executives said they expect fiscal 2023 results to align with previous guidance. 🤔

The overall lack of clarity sent investors scrambling as the constant surprises erode confidence in management’s ability to turn this struggling ship around. The market will certainly receive more clarity during its fourth-quarter results on November 15th, but for now, it’s left to wonder about what new headwinds might emerge.

Both American Depositary Receipts (ADRs) tracking the stock fell to their lowest levels ever. 📉

Last week, we looked at where technical analysts are looking for buyers to emerge in the S&P 500. A similar chart emerged in the small-cap Russell 2000, so let’s review. 📝

As we’ve discussed, small and micro-cap stocks have been significant laggards for years. That said, some technical analysts are making the case for this group to lead a short-term stock market bounce.

The thesis essentially looks at the last 15 months of price action, which has been a choppy mess. When prices reach the top of their range around 200, sellers emerge, and prices reverse. And when they get toward the bottom of their range around 163, buyers appear, and prices reverse. 📊

Well, we’re back down to that level now. Since the index has fallen 18% over the last three months, some argue it’s overly extended and could see a bounce. Others say that the fundamental headwinds are too strong and that big tech’s wreck will pull the entire market lower. 🐂⚔️🐻

As usual, we’ll have to wait and see. But that’s what technical analysts in the community are watching in the coming trading sessions. 🤷