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Amazon Stock Crushed After Missing Revenue Targets

Down it goes

Investors are punishing Amazon after a big revenue miss:

After two days of dramatic volatility in its stock, which saw the share price of Amazon first drop then soar by over $100, Jeff Bezos’ online retailing titan was expected to report blow out earnings, and while it indeed reported EPS which smashed expectations, it missed on revenue while guiding well below consensus, in a carbon copy of what it did last quarter.

In kneejerk response, the stock tumbled more than 6%.

More importantly, Amazon guided Q4 net sales to be between $66.5 billion and $72.5 billion, which however was far below the consensus est. $73.78B. Meanwhile, operating income is expected to come in between $2.1 and $3.6 billion, compared with $2.1 billion in Q4 2017, and also well below the consensus estimate of $3.9 billion.

This will be the key question facing shareholders: why the drop in margins in what is traditionally Amazon’s most lucrative quarter?

Here a quick reminder that at the end of last quarter, Amazon did the exact same thing: beat on Earnings and Operating Income, while missing on revenue and guiding lower, yet the stock soared. Why the opposite reaction this time? The answer is likely due to heightened investor concerns about “peak earnings” and with the company once again guiding well below consensus, even if it is due to sandbagging, the market is not happy.

Indeed, as RJ Hottovy, analyst at Morningstar writes, investors are worried about the weak profit outlook for the busy holiday quarter and why Amazon expects spending to increase.  Specifically, analysts will want clarity on whether it’s a result of one-time costs like investing in a second headquarters or ongoing expenses like giving warehouse workers raises and opening new Amazon Go stores.

 
Doomberg

Written by Doomberg

I am Doomberg, one of the original founding members of Sparta Report, and have been here since the beginning. I am an insatiable news junkie and enjoy reading and writing about the US territories, the Caribbean, video games, smartphones, and of course conservative politics in general.

I also really like pictures of gas stations and claim full responsibility for the silly gas station motif. I'm presently trapped behind enemy lines in a blue state with no hope of escape! The ride never ends.

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