Amazon stock suffers worst day in more than 15 years, wiping out more than $200 billion in market capitalization
Shares of Amazon.com Inc. had their worst day in more than 15 years on Friday, after the e-commerce and technology giant reported its first quarterly loss in seven years.
After the surprise loss and lower forecast, Wall Street analysts were downbeat in their assessment, including multiple cuts to price targets.
“Inflation in wages and shipping costs has put pressure on Amazon’s profitability, and now the war in Ukraine has pushed up fuel costs, adding another headwind,” wrote the analysts led by Shyam Patel of the Susquehanna Financial Group.
“Excess capacity is also putting pressure on profitability, as Amazon invested heavily in 2H21 and is now working to reverse fixed cost deleveraging and increase productivity.”
Susquehanna rates Amazon shares positive and cut its price target to $3,800 from $5,000.
Amazon said it had $6 billion in additional costs for the quarter, including salaries and productivity rates. The company says it’s seeing improvements and making adjustments to reduce that number.
Full income coverage: Amazon seeks to cut costs after first loss in seven years sends shares tumbling
The disappointing results did not shake many analysts’ outlook for the future.
“Amazon is taking the right steps to operate in a challenging macroeconomic environment that includes unexpected inflation and a supply chain crisis,” wrote Wedbush analysts led by Michael Pachter.
“We consider the guidance provided by the company for the second quarter of 2022 to be overly conservative, particularly from an earnings perspective, given a favorable mix change and the potential for improved labor productivity and capacity leverage. In the longer term, Amazon can generate a steady increase in margins by investing in its cloud, fulfillment and advertising businesses.”
Wedbush rates Amazon shares to outperform and cut its target price to $3,500 from $3,950.
“Several bright spots keep us constructive on Amazon, including 1) strong growth from AWS and advertising, and 2) prospects for inflationary pressures, lost productivity, and fixed cost deleveraging to begin to reverse in the future. 2H22 and FY23 bodes well for profitability,” Truist Securities wrote. , which values Amazon shares at a buy with a price target of $3,500, down from $4,000 previously.
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As Amazon takes a closer look at the costs to the business, buyers are looking at their own costs, which worries Neil Saunders of GlobalData.
“As the cost of living increases, consumers have started to reduce the amount of products they buy to balance their budget; volumes in many discretionary categories are turning negative,” Saunders wrote.
“This affects many retailers and channels, but it’s particularly scary for online purchases where a higher proportion of purchases are discretionary and where delivery costs – at least for those who aren’t members of services like Prime – increase the cost As a key destination for online shopping and as a mature player with the largest online buyer base, Amazon is more exposed to this problem than other players.
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GlobalData notes that subscription growth slowed to 13% in the quarter, with the rising price of a Prime subscription being one of the factors.
Other groups of analysts are not as cautious.
“Amazon cited numerous macro headwind challenges, ranging from the ongoing war in Ukraine, high levels of inflation, and supply chain issues. However, they did not cite any weaknesses. additional consumers nor expectations of reduced demand; a departure from other more discretionary names,” Daniel Kurnos of Benchmark wrote in a note.
Benchmark maintained its buy stock rating and lowered its price target to $3,700 from $4,000.
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“If our assessment is correct, Q1 is likely to represent Amazon’s low earnings period, with growth and operating margin improving through 2022 despite disappointing guidance,” Stifel wrote.
Analysts there report an easing in omicron-related costs, a shift to Prime Day in the third quarter, and a normalization in consumer spending after a period of soaring travel and experience spending.
Amazon has announced that the annual Prime Day event will take place in July. This was in the second quarter of 2021.
Stifel has a buy rating on Amazon shares and has cut its price target to $3,800 from $4,400.
Amazon’s price target was also lowered at Raymond James (at $3,300 from $3,950, shares are outperforming), RBC Capital Markets (at $3,500 from $3,880, shares are held to outperform) and JPMorgan (at $4,000 vs. $4,500, stocks are overweight).
Amazon shares have fallen 25.5% since the start of the year, as the S&P 500 SPX index,
fell by 13.3%.