Should you Buy Amazon Stock Before October 29? History Has a Clear Answer.
Key Points
It is unclear how a recent sell-off in AI-related stocks may affect Amazon.
Amazon tends to react to third-quarter earnings reports in similar ways.
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Amazon (NASDAQ: AMZN) reports Q3 2026 earnings on Oct. 29. The e-commerce and cloud giant has benefited from a stable e-commerce business and AI-driven growth.
However, the company pledged $220 billion in capital expenditures (capex) for this year. That staggering sum has strained its finances. Investors are wondering where the capex budget goes from here.
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Still, it could pay to buy the leading e-commerce stock before the report.
Image source: Amazon.
The previous three Q3 reports explain why. Each time the company released these Q3 reports in late October, the stock has risen significantly the next day.
Admittedly, this is not a guarantee, as an earnings miss in Q4 of last year led to a decline after the announcement. Also, as previously mentioned, shareholders have become increasingly concerned about Amazon's high capex.
More than a seasonal pattern
Nonetheless, investors should remember that a recession-resistant e-commerce business bolsters Amazon. While the retail part is low margin, it has driven growth by offering digital advertising, subscriptions, and third-party seller services.
Also, despite the e-commerce performance, the focus remains on the AI-driven cloud arm, Amazon Web Services (AWS). Despite making up just 21% of its Q2 revenue, it accounted for the majority of its operating income. Moreover, AWS revenue grew by 37% annually in the latest quarter, up from 17.5% yearly in the year-ago quarter.
Such a result makes Amazon hard to ignore right now.
Finally, there's valuation. A $53.4 billion pre-tax gain on Amazon's Anthropic investment inflated Q2 net income, pushing the trailing P/E down to 20. The forward P/E of 31 is the more meaningful figure, and it's low compared with past years when Amazon routinely traded above 50 times earnings.
The forward P/E ratio of 31 is still low compared to past years when Amazon routinely traded above 50 times earnings. Such conditions increase the likelihood of a favorable reaction to the earnings report.
In an uncertain environment for AI stocks, anything can happen. Nonetheless, if history is any indication, Amazon stock is probably a buy ahead of the company's Oct. 29 after-the-bell report.
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Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
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