Should You Buy Amazon Stock Before the Massive Investors Update? | AMZN Stock Analysis | $AMZN

Amazon is scheduled to report third quarter financial results after the stock markets close on October 30th. And investors are asking me if they should buy the stock before the company announces those results. I'll answer that question for you in this video. I'll preview what to look out for from Amazon in the upcoming quarter and in upcoming years. What are the big risks? What are the big tailwinds? The big items that the widespread media are not really covering. I'll share with you the key figures that not everyone looks to know from Amazon in the upcoming earnings figures. I'll share with you my fair value calculation for Amazon so you can see if the stock is undervalued or overvalued coming into these results. I'll do all that in this short video so let's jump right in. I want to thank The Motley Fool for sponsoring this video. Visit fool.com slash parkev for the 10 best stocks to buy now. So Amazon last reported quarterly financial results to investors on July 31st, 2025. And in order to know what to look for in the upcoming quarter, we have to look at the most recently completed quarter to see what to expect. Net sales in that most recently completed quarter jumped by 13% to $168 billion. That was much better than I was expecting. It was better than what management was expecting during that quarter. I was expecting a much bigger negative impact from tariffs. We didn't see that just yet for Amazon. Operating income jumped to $19.2 billion compared to $14.7 billion in the same quarter last year. That was an increase of a whopping $4.5 billion. Now the key number that all Amazon stock investors need to look out for is the AWS segment. This is Amazon Web Services. It increased by 17.5% to $31 billion in the most recent quarter. In the upcoming quarter, we want to see at least 17.5% growth. More likely, investors will be more happy with something 18%, 19% or above. The reason for that, AWS is Amazon's most profitable segment. It's also the segment that Amazon is investing most aggressively. For 2025, Amazon has forecasted it will spend over $105 billion on capital expenditures. Most of that to support this AWS segment. So if they're spending that much money in one particular category, you want to see some early results from those investments. You want to at least see the revenue growth rate accelerating. It doesn't have to jump or double or triple. You just want to see some early evidence of an acceleration in revenue growth in this segment. At least that's what I'm hoping for as an Amazon shareholder myself. I bought Amazon stock a few weeks ago and that's what I'm hoping to see. And if I'm not seeing that, I'm going to be disappointed. Also, AWS had major outages earlier this week. Investors need to hear about what the negative implications are from that outage. What is Amazon's management team seeing in the days in the aftermath of that outage? Now I'm comparing that outage to an outage that CrowdStrike caused a couple of years ago. And CrowdStrike is still suffering the negative consequences from that outage in terms of financial and reputational damages. CrowdStrike's stock price has soared, but the reputational and financial damage is still being felt at CrowdStrike. I want to give a kind of a comparison, so I want to get more insight from the company's management team about those implications. Cash flow is going to be critically important. If Amazon is adamant about spending over $100 billion annually on capital expenditures, I want to see the company's generating strong cash flow to support those investments. In the previous trailing 12-month period, the company generated a whopping $121 billion in operating cash flow, which was up 12% year over year. This is why I'm okay with Amazon spending so aggressively on capital expenditure, because they're generating so much cash flow in the business that they can reinvest that back into the business. Especially because if you look at the longer-term trend of the return on invested capital from Amazon, they've been a very effective management team at allocating capital. When a company's management team proves to me that they can allocate capital effectively and they're not wasteful with that spending, I give them just the green light. Go ahead, spend as much as you see that is worthwhile. Because you've proven to me that you know what you're doing, and you're a management team of a multi-trillion dollar company. I'm not going to pretend to know more about your business than you do. So if you've shown the numbers, the returns on invested capital over a longer period of time, all I can say is, okay, keep doing what you're doing. You clearly know what you're doing. You're good at this, so keep doing what you're doing. Now, the opposite is true if the company is relatively poor at doing that, right? Some of the car manufacturers, for instance, the EV manufacturers, they're spending billions of dollars in a category that's not generating anywhere near the return on invested capital. They were forecasting five, six, seven years ago. These are companies I would not trust with my capital, and so I haven't invested in any EV companies. In fact, I'm overall short on EV companies and the EV industry overall. I don't think that's an effective allocation of capital. Consumers don't want electric vehicles, generally speaking, right? Less than one out of 10 purchases are electric vehicles, but consumers do want more convenience in online shopping. Consumers do want more large language model effectiveness. Businesses want more artificial intelligence, and so this is a category management from Amazon has said several times that demand is greater than supply. So clearly the market wants more of this computing power, and so it's okay for Amazon's management to spend on this category. Now, if it was only Amazon's management team saying that, then I would be a little bit skeptical, but I'm hearing the same thing from Amazon, right? Saying that demand exceeds supply. I'm hearing the same thing from Microsoft, saying that demand exceeds supply. I'm hearing the same thing from Alphabet, saying that demand exceeds supply. I'm hearing the same thing from Nvidia, saying that demand exceeds supply. So it's several data points, all pointing to demand for artificial intelligence that exceeds supply. So investing in a company that's investing in artificial intelligence and building those capabilities, I think is a reasonable investment, and that's one of the reasons among many more why I invested in Amazon stock. I'll link to the video on one of the end screens where I highlight all of my reasoning for purchasing Amazon stock a few weeks ago. Right now, Amazon stock is trading at a current price of $221. I calculated a fair value for this stock at $295. So I see this stock as being undervalued when using my proprietary discounted cash flow model. Now, when I go to fiscal.ai and retrieve the forward price-to-earnings ratio at $32, it's trading at about fair value compared to where this business has been according to this metric going all the way back to early 2024. So it looks reasonably valued. The big risk to look out for is the impact of tariffs. How negative will this be? What's the foresight on tariffs and the negative implications? We all know it's going to be negative for Amazon, but there are offsetting factors. And so net-net, what's the impact of tariffs? We want to hear more from management and get more details. To answer the question, is Amazon stock a buy before earnings? I think so. I bought Amazon stock before earnings. It was a few weeks ago, but I guess it was before earnings. If you're interested in Amazon stock, buying before earnings is fine. If you want the less risky approach, you can buy it after earnings or you can split your purchase in two and buy half before and half after. But I wouldn't mind buying ahead of earnings. It's not so clear-cut where I would say, yes, definitely buy it before earnings. You don't want to miss out on the upside. I can't say that. I also won't say that it's too expensive, that you should wait until after earnings. No, I think it's a buy right now. But whether or not you buy before earnings or after earnings, not clear-cut, not clear-cut. But if you want to buy before earnings, you're afraid of missing out on the upside. I think it's reasonable. The lower risk approach would be to go half and half, half before and half after earnings. Hey, everyone. I'm excited to announce that my book is finally available for sale. I've been working on it for more than a year now, so I'm really excited to finally share this with you now. It goes through my framework for evaluating stocks. Some of you often ask why I like this stock or why I like the other stock. And this framework provides you the things that I look at when I'm evaluating stocks. I've added the link in the description below.