Amazon Is Down By 12%, Here Is Why

Key Insights

• Amazon’s Q1 2022 earnings fell short of analyst estimates. 
• The company released disappointing guidance for Q2 2022. 
• Analysts rushed to reduce their price targets, putting more pressure on Amazon stock. 

Amazon Stock Falls After Q1 2022 Report Misses Analyst Estimates

Shares of Amazon  found themselves under strong pressure after the company released its first-quarter results. Amazon reported revenue of $116.44 billion and a loss of $7.56 per share, meeting analyst estimates on revenue and missing them on earnings. The net loss includes a pre-tax valuation loss from Amazon’s investment in Rivian.

In the second quarter, Amazon expects to report revenue of $116 billion – $121 billion. At the lower end of this guidance range, Amazon’s forecast implies no growth on a quarter-over-quarter basis. Amazon also forecasts its second-quarter operating income at -$1.0 billion – $3.0 billion.

The market focused on the weak Q2 guidance, and analysts rushed to cut their price targets for the stock. The major boost from the pandemic is over for many companies, and even Amazon was not immune to the changes in consumer behavior and general economic situation.

What’s Next For Amazon Stock?

The current analyst consensus implies that Amazon will report earnings of $47.33 per share in the current year and earnings of $71.01 per share in the next year, so the stock is trading at 36 forward P/E.

Amazon shares have already pulled back by more than 30% from the all-time highs that were reached back in 2021, but the stock remains richly valued. While Amazon’s shopping business faces some headwinds due to supply chain issue and customer’s desire to shop offline after the pandemic, Amazon Web Services (AWS) delivers strong results.

However, it remains to be seen whether the strength of the AWS segment will be sufficient enough to provide support to Amazon stock. Analyst estimates have been moving lower in recent months, and this trend will be continued after the release of the Q1 2022 report, which is bearish for Amazon shares.

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