Is Amazon a Buy Heading Into Earnings?

Tech company Amazon (NASDAQ:AMZN) is set to release its fourth-quarter earnings on Feb. 3. In the past six months, the stock has fallen 15% as growth stocks have come under pressure and investors have been moving away towards more value-oriented investments.

Trading at around 60 times earnings, the stock isn't a cheap buy. Investors are willing to pay such a premium because of the company's continued growth.

But when Amazon last reported its earnings in October 2021, its numbers were underwhelming, with per-share profits of $6.12 falling significantly below the $8.92 that analysts were expecting. The company was facing supply chain issues that are likely to continue to be problems in the fourth quarter.

However, with the company likely factoring that into its forecast for Q4, which analysts found underwhelming, it could make it easier for Amazon to meet expectations and potentially outperform. Plus, with the emergence of the omicron variant and a possible increase in online spending, that could lead to a strong forecast for Q1. According to Mastercard SpendingPulse data, retail sales grew by 6.9% last month, suggesting that consumer spending remains strong. E-commerce, in particular, looked impressive, rising at a rate of 13.5%

With a lukewarm forecast for Q4 that might be easy to beat and a possibly strong outlook upcoming, Amazon is a stock that I see as having the potential to deliver a positive surprise when it reports its earnings next month. Although given its expensive valuation I wouldn't expect it to surge in value, especially since growth stocks have been struggling in recent months, it could be a good buy before it reports its Q4 numbers.