Stock in e-commerce behemoth
plunged after beating Wall Street’s earnings forecast. Stop us if you’ve heard that before. A beat and drop is the typical outcome for Amazon stocks.
Yes, investors always have reasons to get nervous, and this time the reason is not the profit itself. Amazon.com (ticker: AMZN) reported $15.12 in unadjusted earnings per share. Wall Street was looking for $12.28 a share. Instead, the company predicts a slowdown in online sales for the coming quarter.
The stock fell 7.6% on Friday. Amazon is probably the reason the
Dow Jones Industrial Average
decreased by 0.5% and 0.4% respectively. Amazon sucked the wind out of the market.
With Thursday’s gains and Friday’s decline, it marks the ninth profit increase in the past 12 quarters, and the sixth time it has fallen after a beat. In other words, there’s a 67% chance that Amazon’s stock will fall, no matter how good the earnings are.
However, investors focused on the third quarter may be missing the point. What investors should remember is at the beginning of this series – the third quarter of 2018 – Amazon stock was trading at about $1,782 per share. It closed Friday at nearly $3,328 per share. That equates to an annual average return of approximately 25%. Not bad.
Quarterly reports are funny things. More often than not they confirm what investors already know. To take
(CAT). Cat and Amazon have little in common, except that they both reported between the close of trading on Thursday and the opening of trading on Friday. Cat’s quarter shows strong demand as the economy recovers and pressures from rising raw material costs. No shock. And yes, the stock ended 2.7% lower.
Quarterly reports rarely change an investment thesis. Yes, sometimes real bombshells fall. For Amazon, the slowdown in online sales coming from the pandemic isn’t likely to qualify, as bomb-proof Friday trading seems to indicate.
That’s our guess.
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