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Amazon Earnings: Everything Sending Stock Lower

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Amazon  (AMZN)  shares fell considerably after earnings, as the tech giant beat revenue estimates, missed on earnings and said that it is spending hugely. Cloud revenue, an area of potentially accelerated growth, also disappointed. 

The stock fell as much as 5% in postmarket trading, after having risen 30% in the past month into earnings. 

Investors were looking for the coronavirus and lockdowns environment to spur heavy spend on e-commerce from consumers and cloud services from businesses. Those two events occurred, but cloud revenue missed estimates, while Microsoft’s  (MSFT)  enterprise cloud sales beat estimates earlier this week. 

Here were the results

  • Revenue: $75.5B v. analyst estimates of $73.69B
  • Operating Margin: 5.3% v. 5.5% 
  • EPS: $5.01 v. $6.23 

The sales beat seemed driven by e-commerce, especially in groceries and essentials, which management highlighted throughout the earnings print. Amazon Web Services revenue came in at $10.22 billion, against estimates of $10.33 billion. 

Management said much of the operating margin contraction year-over-year and miss of estimates was attributable to a surge in wages and spend on ramping up e-commerce capabilities, especially related to groceries and essentials. 

The second quarter guide was also disappointing to investors, as Amazon has once again revisited investment mode, which investors had begun priced out of 2020 enrages estimates. 

Management is guiding for revenue at a midpoint of $78 billion, roughly in line with analysts estimates. But the company said its current quarter operating profit will be roughly break-even, with the potential for a $1.5 billion loss or profit. 

Long-term, Amazon still looks like a good bet to most, especially as it has repeatedly proven its ability to invest now and gain later. Eric Clark, Founder of Rational Dynamic Brands Funds, gave his long-term thesis on the stock. Watch the quick video above. 

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