Amazon Stock Falls As Investors Weigh Margins Against Cloud Growth
Amazon stock fell on Friday as investors assessed the strength of its cloud computing business against labor and supply chain issues impacting the growth of its e-commerce. AMZN stock has avoided any downgrade by analysts despite the lack of third quarter results and forward looking forecasts.
Amazon.com (AMZN) Thursday night, it reported adjusted earnings of $ 6.12 per share, down 51% from a year earlier. Revenue increased 15% to $ 110.8 billion. Analysts had expected Amazon to report earnings of $ 8.92 per share on revenue of $ 111.6 billion.
The company’s cloud computing unit, Amazon Web Services, posted revenue growth of 39% to $ 11.6 billion. This topped estimates for 35% growth in cloud computing.
“With AWS strong, the key question for action is whether the street views the pressure on retail margins as temporary,” Bank of America analyst Justin Post said in a report to clients.
Amazon stock fell 2.8% to nearly 3,348 on the scholarship today. AMZN stock is up around 2% in 2021.
Amazon stock: earnings estimates beat report
For its fourth quarter, Amazon is forecasting revenue of between $ 130 billion and $ 140 billion. This analyst missed the estimate of $ 142 billion. Amazon is forecasting earnings before interest and taxes, called EBIT, of $ 1.5 billion against estimates of $ 8.1 billion.
“After almost doubling its execution capacity (warehouses) since the start of Covid, the company noted that it was no longer limited in terms of capacity,” UBS analyst Michael Lasser said in his note to customers. “However, the labor shortage resulted in an additional $ 2 billion in costs in the third quarter and costs are expected to double in the fourth quarter.”
Amazon stock had underperformed after posting June quarter earnings that missed estimates, as did its outlook for the third quarter. The third-quarter earnings estimate for Amazon stock fell to $ 8.92 per share, from $ 12.89 on June 30, according to FactSet.
Amazon’s new investment cycle
Amazon plans to build its first large-format retail stores, make a new foray into physical outlets, and step up its battle against Walmart (WMT). Additionally, Amazon is investing in same day delivery for online shoppers.
“The key question from there is when / if the current investment cycle is generating evidence of equity gains and margin leverage,” said Brad Erickson, RBC Markets analyst. Capital, in a note. “Only time will tell, but in our opinion, AMZN’s stock is making critical investments as consumers increasingly demand faster shipping, which should at least maintain market share gains while increasing gross profit in dollars. “
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