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Amazon reported first-quarter earnings on Thursday night last week, and the shares fell 14% on Friday to $2 485 a share. That was the lowest closing price for the stock since June 2020 and its largest one-day drop since July 2006.
I recall a time when Amazon usually posted quarterly losses, but for the last seven years they have been strongly profitable. This was the first three-month loss in ages, so what gives?
Amazon Web Services did very well, as usual, up 37%. The three problems were (1) weak sales guidance for the second quarter, (2) slow growth in Amazon's online retail business and (3) a big write-down on the value of their investment in electric vehicle maker Rivian.
In hindsight, Amazon's aggressive push to expand during the Covid-19 period was a little hasty. CFO Brian Olsavsky (pictured below) said they were pulling back on the historic surge in adding warehousing space. The number of employees has been trimmed by 100 000 to 1.6 million.
I'm not too concerned about this earnings disappointment. It's not the first time that Amazon has pursued growth at the expense of short-term profits. Online sales will recover and the US consumer is in good shape. In other words, hold Amazon and wait for better days.
As an aside, the company announced that Amazon Prime Day will be held in July this year, and the range of special deals for Prime members will be extended.
Keep in mind too that Amazon's 20-for-1 stock split is approaching. It will trade on a split-adjusted basis on June 6. If you have any questions, let us know.
