Amazon stock takes a beating amid lower profits and weak guidance for the holiday season

 

By Sam Becker

October 27, 2022
 

Amazon reported mixed Q3 earnings on Thursday, and Wall Street did not respond kindly. The online retail giant said revenue was $127.1 billion, an increase of 15% year-over-year, but net income fell to $2.9 billion, compared to $3.2 billion a year ago. 

 
 
Amazon stock takes a beating amid lower profits and weak guidance for the holiday season

Notably, Amazon’s fourth-quarter guidance—a harbinger as to what the company expects in terms of demand from consumers during the busy holiday shopping period—expects net sales of between $140 and $148 billion. That’s relatively lackluster for a company used to seeing far more explosive numbers, and as such, Amazon’s shares are taking a hit in after-hours trading.

Following the earnings release at 4 p.m. ET, Amazon stock fell by more than 18%.

Amazon is the latest to report earnings during a rather tumultuous time in the tech sector, with many companies that had benefited during the early pandemic now cutting staff and costs in preparation for tighter economic conditions ahead. Facebook parent Meta and Google parent Alphabet also reported earnings this week, and both whiffed on expectations. Meta’s revenue fell 4%, and its share price took it on the chin, falling as much as 23% on Thursday. Alphabet’s latest earnings likewise disappointed investors; its share price fell as well.

 
 

While both Meta and Alphabet are tightly fastened to the advertising-driven internet sector, Amazon is in a different position as it straddles the line between tech and retail (and others). Big Tech companies are experiencing perhaps the worst economic conditions of their relatively short lives (with the exception of 2008), but Amazon’s results are largely driven by online sales. Even so, online retail hasn’t been immune to current economic conditions—the Seattle company has found ways to cut costs over the past year or so, instituting a corporate hiring freeze, per the New York Times. CNBC reported, meanwhile, that Amazon also mothballed a number of experimental projects and services, such as a delivery robot, and its telehealth service.

“There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” Amazon CEO Andy Jassy said in a statement. “What won’t change is our maniacal focus on the customer experience, and we feel confident that we’re ready to deliver a great experience for customers this holiday shopping season.”

The deluge of disappointing earnings reports hasn’t sapped everyone’s optimism. There is some hope, for instance, that the coming holiday season could lead to an uptick in the economy, and the most recent GDP numbers are encouraging as well. 

 

“I have a positive outlook in the tech sector for the remainder of 2022, going into 2023,” says Wes Gottesman, market advisor at TradeZing. “Typically, the holiday season would have a positive impact.”

Gottesman adds that investors would do well to hold fast through what are likely to be volatile months ahead, as “the tech sector is full of strong companies with strong balance sheets.”

It’s worth mentioning, too, that Microsoft’s latest earnings report beat expectations, so not all tech giants are on the ropes. “In a world facing increasing headwinds, digital technology is the ultimate tailwind,” wrote Microsoft CEO Satya Nadella in a corresponding earnings release.

Fast Company

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