Yahoo Finance

Magnificent Seven member Amazon set to report results after the market closed today, Thursday. Given some of the giant historical swings in the stock price after earnings, what is the best way to approach investing in this big tech heavyweight? I'm Jared Blickry, host of Stocks in Translation, and let's get to some charts here. This is a look back of 16 years of what has happened after Amazon reports earnings, from one day, one week, one month, one quarter, one year. Why 16 years? This was a starting in the post-global financial crisis recovery, and it's kind of the birth of the AWS era. And so, kind of significant there. But what I want to highlight and what you should focus on is that the one day, one week, and one month results are all pretty flat here. They're very volatile. Um, a large move to the upside was often countered by a large move to the downside. Once you get to the one-quarter level, we see median gains of about 6.35%. And it's positive almost 70% of the time. But that's really not that impressive because Amazon is one of those leaders, uh, you really want to see a percent positive above 70%. So finally, at the one-year level, we're seeing gains of a median, uh, median gains of about 32% with 85% positive. Now, I want to draw this forward a little bit to the last two and a half years, because that covers 10 periods, and basically this entire bull market going back to the fourth quarter of 2022, and you can see things improving here. Uh, one day is still pretty flat, one week nothing to write home about, but then things get interesting around one month and one quarter, and you're going to see one-year results, those median results shoot up to over 50%, and we've seen those results higher 100% of the time, although with the caveat that we haven't actually achieved that one-year price, that one-year length just yet for some of those, uh, the last two or three quarters. Now, I want to get to another chart, which shows if you're holding for one year, uh, sometimes even that can lose. And this goes all the way back to the beginning of the century, and we can see that holding for one year, and this is a blended average of two and a half returns, only holding for that one-year period, they hit almost 1% in the wake of the.com boom and bust. So that was a recovery, but we saw it dip negative there in the global financial crisis, and then it dipped negative again in 2022. That was that nasty bear market. But you can see, it's not uncommon for the one-year returns to approach 50%, and given the trajectory, we could reach there again. So now, I want to go into what we can expect today from earnings based on history. And first, a little definition. Options implied volatility. This measures investors' expectations of future price swings based on options prices, but it does not indicate direction up or down. This is just a measure of how big the swings we expect to be. So tomorrow, the options or today, the options market is pricing in a post-earnings reaction of 6 and a half percent. Now, the average post, uh, earnings announcement reaction over the last two and a half years has actually been two and a half, or two percentage points higher, 8 and a half percent. And this is quite a bit higher than the average daily swings for all the non-earnings days. That's only two and three-quarters of a percent. So I'm going to hold it there. We're going to have to see what happens after the close today, but given the historical price reactions, we could go up, we could go down. The bottom line for investors is that you want to hold for probably a longer period of time. So tune into Stocks in Translation for more jargon busting deep dives, new episodes on Tuesdays and Thursdays on Yahoo Finance's website or wherever you find your podcasts.

All right, Jared. Thank you so much.