Why Did Google Pop And Amazon Drop Post Their Earnings Events?

On Thursday night, Google reported earnings that handily beat Street consensus. The company reported earnings of $7.73 per share on revenues of $24.75 billion for the March quarter. The Street had been looking for earnings of $7.40 per share on revenues of $24.2 billion going in to the earnings event. A sizable beat by any count, especially if one considers the size of the company.

The same night, Amazon also reported its March quarter results that came in ahead of Street consensus. The online retail behemoth reported earnings of $1.48 per share on revenues of $35.75 billion versus Street expectations of $1.13 per share and $35.31 billion going into the earnings event.

However, this past Friday, the two stocks seemed to divert in terms of investors reaction to the earnings.

Google ended the day higher by 3.7%, or $33.08 per share, at $924.52 per share after hitting an intra-day high of $935.88 per share. So, Google closed roughly $11 points lower than its intra-day high. Google shares traded at 2.3x its average daily volume of the last 90 days.

Amazon ended the day higher by $6.61 per share or just 0.72% at $924.99 per share after hitting an intra-day high off 949.50 per share. Amazon closed almost $25 per share lower than its intra-day high.  Amazon shares traded 2.1x its average daily volume of the past 90 days.

Both Google and Amazon saw the usual plethora of price targets raises, estimates raises and a few ratings upgrades going forward post their respective results. From the dozens of Street research reports that I read on both companies, the high targets (post results) are now $1,200 per share for Google/Alphabet and $1,250 per share for Amazon, up about 30% and 35% respectively, from current levels.

So, why did Google shares close just off its highs for an impressive post earnings gain while Amazon's shares performed less impressively, given the fact that both companies beat expectations easily?

The primary reason was the YouTube cloud that Google was under. Every pundit/guru/swami/darksider/kindly uncle was recommending that investors should sell their shares and head for the hills. All these folks had the "best interests" of shareholders at heart and many investors could have indeed been shaken out of their investment in the noise and shouting that arose out of the YouTube ad-related situation.

More importantly, Amazon shares had been on a tear since the last earnings report (up almost $110 per share) while Google shares had risen more modestly in the same time frame (up $45 per share or so) as investors continued to worry about the ad-related issues. As it turned out, the shouting over YouTube was pretty much nonsense and only served to scare the uninitiated out of their investment.

I was able to get a trading position in Google on Thursday ahead of the earnings report that night, but was unable to get a fill on a trading long position on Amazon ahead of the two earnings reports.

As they say, all's well that ends well.

Having said that, both companies are a buy even at current levels because if you are looking for growth, there are not many companies out there that are better than Google and Amazon in their respective spaces.

However, take into account the usual caveats, being the geopolitical situation globally does not worsen and the noise out of Washington does not get increasingly strident and negative.

(Long googl, amzn, long and short options on both)

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