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.
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.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
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.
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.