There are certain stocks that should never be bought ahead of earnings reports. It comes back to the tenet of never buying anything that you don’t understand. Amazon (AMZN:NASDAQ) , on the surface, would seem to be a relatively simple business. You buy merchandise on their website and they deliver a box to your doorstep. The problem is that their retail business operates on razor thin margins. They make most off their money from Amazon Web Services, a cloud computing solution. They could also be considered a subscription business with their 100 million Prime members.
The problem with buying a stock like Amazon ahead of earnings is that no one really knows what the company is doing. They kept the number of Prime members secret for years and the number, once unveiled, were shockingly high. The company reported earning per share this afternoon that were nearly twice what analysts were expecting. Apple (AAPL:NASDAQ) used to be a company that analysts were perplexed by. Buying companies like these heading into earnings reports is a good way to get whipsawed.
DISCLOSURE: THIS ARTICLE WAS WRITTEN FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY SPOKEN OF HERE. ALL INVESTMENTS INVOLVE RISK AND REQUIRE DUE DILIGENCE TO DETERMINE IF THEY ARE APPROPRIATE FOR YOU. I DO NOT PERSONALLY OWN ANY OF THE STOCKS MENTIONED HERE AND DO NOT PLAN TO INITIATE ANY POSITIONS.