The e-commerce behemoth failed to impress investors this time. In the second quarter, Amazon fell short of another all-around beat. Despite higher-than-expected EPS, revenues that were well below consensus pushed (AMZN) - Get Amazon.com, Inc. Report shares down in after-hours trading: -7%.
Below, the Amazon Maven lists the 3 key takeaways from earnings day:
(Read more form Amazon Maven: Live Blog For Amazon Stock Investors: Q2 2021 Earnings)
#1. E-commerce disappoints
We had previewed that e-commerce seemed to be alive and well, even in a post-pandemic environment in which stay-at-home habits were less of a tailwind. Amazon's results showed that e-commerce is, indeed, alive - but not so well as expected.
North America growth of 22% was pretty unimpressive for a company like Amazon, at least considering the past year and a half: worst rate since Q4 of 2019. Online store revenue growth of 13% was definitely the weak spot. The lowest in the past 6 quarters had been 25%.
See graph below. North America revenue growth dipped sharply from Q1 to Q2 of 2021. The "bump" between Q4 of 2019 and Q1 of 2021 is very clearly marked by the pandemic tailwinds.
The days of intense "shopping from home" driven by the pandemic seem to be over for Amazon. This is not to say, however, that e-commerce is struggling. Instead, it is just not performing as robustly anymore (and likely will not continue to, judging by soft revenue guidance).
#2. All else looks solid
Now, of course, some perspective is needed. Amazon is huge, worth nearly $2 trillion, and the company is still posting double-digit revenue growth across all its reportable sub-segments as if it were a small underdog climbing up the ranks. This is your glass half full.
Cloud for example, is still on fire. Growth in AWS has not been this good since Q2 of 2019. And that's not all: the physical channel is recovering, while subscription services remain in very decent shape and advertising presents an untapped growth opportunity.
Below is AWS revenues since 2014 (blue area) along with quarterly YOY growth rates (orange line). Notice the bump off the mid-2020 low. The business is gaining scale while still growing quite strongly.
#3. Pandemic tailwinds vs. long-term thesis
After having covered Apple's outstanding report two days ago, which was pretty much pandemic-agnostic, I can say that Amazon has not fared as well as its peer from Cupertino coming out of the COVID-19 crisis.
It is not unreasonable to think that some (traders, mostly) were hanging on to Amazon stock in hopes that the company would continue to crush on e-commerce through 2021. Those people are probably heading for the exits.
For the longer-term thesis, is Amazon's growth story in digital retail, cloud, and consumer products and services dead? Not even close. So, patient investors might actually appreciate this Friday's likely pullback in share price.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Amazon Maven)