Why Amazon’s Next Earnings Could Trigger a Stock Breakout

Key Points

• Shares of Amazon rallied over 50% in 2024, outperforming most of the market.
• A recent pause, though, has set the stage for the next phase of the rally.
• Strong fundamentals and a bullish outlook from multiple analysts both point to fresh gains in the near term.

Shares of tech giant Amazon.com Inc NASDAQ: AMZN have long been a favorite of investors, delivering over 50% of gains in 2024 alone and setting multiple all-time highs along the way. While the past month has seen the stock take a breather, trading sideways and consolidating, it's also forming a solid support base to support the next phase of the rally. 

As the trading range narrows, there are several reasons to think that a breakout might be on the horizon. For those of us looking to spice up our Q1 portfolios, this stock is worth watching closely. Let's jump in and take a closer look at what's driving the excitement around Amazon heading into 2025.

Amazon Smashes Expectations With Record Revenue Growth

To start with, it has to be noted how the tech titan smashed expectations pretty much throughout last year with its earnings reports. Last quarter, for example, saw it deliver a record revenue print alongside a 56% jump in operating income, with strong performance across all its key segments. This kind of momentum was instrumental in pushing the stock to its highs late last year. 

Heading into their next earnings report at the end of January, Wall Street's expectations remain high, and deservedly so. Investors should look for the stock to continue building on this momentum in the coming weeks as the smart money positions itself in advance of another strong performance after what is traditionally a bumper holiday season. 

Amazon Continues to Collect Bullish Analyst Ratings

There's also the fact that Amazon shares have been collecting multiple bullish ratings on a regular basis for much of the past year, which suggests a bright outlook for the company in 2025. Already this month, two analyst teams have reiterated their confidence in the stock, boosting their price targets significantly.

Just this week alone, the team over at Wedbush maintained their Outperform rating while raising their price target to $260. This echoed the update from Wolfe Research last week, which also maintained an Outperform rating along with a boosted price target of $270. 

This bolsters the argument that we could soon be looking at a breakout, given that from where Amazon shares closed on Thursday, these price targets are calling for at least 20% additional upside in the near term. What is particularly impressive is that these latest updates align with a broader trend of analyst optimism that stretches back through December and all of 2024. 

The Importance of Amazon’s Upcoming Earnings Report

That said, no stock is without risks. With a price-to-earnings (PE) ratio of 48, Amazon's valuation may appear stretched and a little frothy to some investors. To justify this valuation, the company will need to deliver a stellar earnings report at the end of the month.

Any signs of slowing revenue growth or tightening margins could spook the market, particularly against the backdrop of a broader pause in equity markets as the Federal Reserve adjusts its rate policy. Still, for long-term investors, we're inclined to say that these concerns are heavily outweighed by the company's track record and the stock's reputation for rallying to record highs.

Why Amazon’s Stock Could Enter Blue-Sky Territory

The technical setup also supports the theory that Amazon is poised for a breakout in the coming weeks. The stock's RSI (Relative Strength Index) currently sits at 51, which indicates the bulls are in control of momentum, albeit not by a massive amount, but more importantly, the stock has a huge amount of room to run. If the stock and the broader market can continue to tick higher through the rest of January, Amazon shares should be in a strong position to kick on into blue-sky territory with their next earnings report. 

As we look ahead, Amazon's blend of strong fundamentals, bullish analyst sentiment, and promising technical indicators make it an exciting prospect for 2025. With a solid catalyst on the horizon in the form of its upcoming earnings report, this is a stock that's worth watching closely.