Amazon tumbles on disappointing forecast for holiday revenue


Jeff Bezos, CEO of Amazon, which disappointed Wall Street Thursday despite posting much better-than-expected third quarter earnings.

Wall Street was looking for earnings of $3.14 per share on revenue of $57.1 billion. After blazing a path beyond $2,000 earlier this year, imputing a valuation of the company of $1 trillion, the stock price has fallen back a bit as tech stocks overall continue to get pummeled this fall.

The fall in shares, if replicated when USA stock markets open officially, would knock almost $90 billion off Amazon's market value and relegate it behind Microsoft and Apple in terms of market value.

While US economic growth kept apace despite trade wars, the same can not be said of USA corporate profit growth, as a slew of disappointing forecasts this earnings season showed how tariffs, rising wages and borrowing costs as well as jitters over geopolitical events are hurting companies. Earnings easily beat expectations by 86%, but revenue missed analysts estimates by 1%.

"Shares are up 52% YTD, hence this kind of "growth scare" is likely to weigh on sentiment in the near term, but ultimately will work itself out (likely by 1Q19)", Barclays analyst Ross Sandler wrote in a client note.

Alphabet shares lost ground after the earnings report and were down 5.04 percent in pre-market trading Friday.

Net sales at the West's e-commerce leader climbed to $56.6 billion in the third quarter, up 29 percent year-on-year.

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Q4 revenue (forecast): Between $66.5 billion and $US72.5 billion.

Internet titans Google and Amazon came under an investor cloud after posting disappointing sales updates, with the search leader also on the defensive for reportedly hushing up sexual misconduct. Add in the recent stock market rout, and the tech companies had little room to bobble their results.

"With consumer sentiment and employment rates near 18-year highs and ongoing store closures in the USA, we believe Amazon's strong retail sales growth will continue through the balance of the year and beyond", the analyst added.

AWS accounted for just 12 percent of Amazon's net sales, but the segment's operating income was $2.1 billion.

And the company continued to see success in advertising. That purchase happened in the middle of the third quarter last year, which meant that Amazon included only about a month's worth of Whole Foods' revenue in its third-quarter results last year, versus a whole quarter's worth this time around. Its "other" revenue, which largely comprises advertising sales, jumped 122% to $2.5 billion.

Amazon's strength will be a source of concern for the so-called duopoly who must now nervously look over their shoulders as their market share is eroded, with some advertisers beginning to pre-emptively switch as much as half of their budgets from Google to Amazon.