Amazon shares fall 14% for worst day since 2006

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Andy Jassy, ​​chief executive officer of Amazon.Com Inc., at the GeekWire Summit in Seattle, Washington, US, on Tuesday, October 5, 2021.

David Ryder | Bloomberg | Getty Images

Shares of Amazon fell 14% Friday after the company gave a revenue outlook for the current quarter that fell short of Wall Street estimates. It’s Amazon’s worst day since July 2006.

Amazon said Thursday it expects revenue between $116 billion and $121 billion in the second quarter, falling short of analysts’ average estimate of $125.5 billion, according to Refinitiv.

Amazon’s core businesses have stalled as a flurry of online shopping wanes as the economy reopens after the pandemic. The company’s operating costs are increasing faster than revenue. Amazon has invested heavily to staff its warehouses and address supply chain challenges, and now faces rising inflation and rising transportation and labor costs.

The forecast for the second quarter suggests that revenue growth could fall to a range of 3% to 7% from a year earlier, marking a further slowdown from the first quarter, when Amazon sales rose 7%. .

Amazon also lost about $3.8 billion in the first quarter, compared to a profit of $8.1 billion a year ago. The company’s investment in electric vehicle manufacturer Rivian weighed on its profits.

While revenues fell short of expectations at just $6 million, the bigger headline was the company’s first quarterly loss since 2015, with a loss per share of $7.56, or nearly $16.00 lower than the company’s expectations. Street earnings per share,” said William Blair analysts. , which outperformed Amazon stocks Thursday, in a note to customers. “Under the hood, the company reported a pre-tax loss of $8 billion related to its investment in Rivian Automotive. Recall that the company reported a $12 billion gain on the investment in the previous quarter. We estimate earnings per Share of the company excluding the investment-related loss would be about $3.40, still 60% below consensus, as the company still faces headwinds related to shipping, labor, overcapacity and tough comparisons from last year. “

Analysts such as Youssef Squali of Truist Securities remain optimistic that Amazon’s outlook will improve in the second half of the year. Squali said in a Friday note to customers that he expects Covid-related costs, along with labor and inflationary pressures, to decline as the year progresses, while Amazon’s fulfillment network becomes more efficient as staffing and supply chain issues normalize.

“We should see material improvement in labor costs and fixed cost efficiencies in 2H22, starting with Prime Day in July and then into the seasonally strong 4Q22,” said Squali, who recommends buying Amazon stock.

Correction: This story has been updated to reflect that Amazon is on pace for its worst day since 2006, not 2005.

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