Amazon.com, Inc. (AMZN) Stock: Another FANG Stock Bites the Dust!

Advertisement

Investors pumped up the buying on Amazon.com (AMZN) ahead of the release of the company’s fourth-quarter results Thursday evening. By the bell, Amazon stock had gained nearly 9%.

Amazon.com, Inc. (AMZN): Another FANG Stock Bites the DustThat, perhaps, was a little too optimistic.

AMZN shares were off some 13% in after-hours trading thanks to a significant earnings miss.

With the markets in the correction mode, there is little room for any signs of weakness — just look at what has happened already to stocks like Netflix, Inc. (NFLX) and Apple Inc. (AAPL).

Investors aren’t in a forgiving mood, and Amazon earnings included a lot that needed to be forgiven — especially on the bottom line.

And as for Amazon earnings, there is certainly much to be forgiven — especially on the bottom line. For the quarter, earnings came to $1 per share on revenues of $35.75 billion, with the latter number up about 22% on a year-over-year basis. However, sales missed the Street’s estimate of $35.93 billion, and profits were well short — analysts were hoping for $1.56 per share.

It should be no shock that Amazon stock is getting dumped in a big way.

Granted, this is not to imply somehow that the company is in trouble. Far from it. AMZN continues to remain the dominant e-commerce player, with annual revenues over $100 billion. For the most part, the company is making life tough for brick-and-mortar firms like Wal-Mart Stores, Inc. (WMT) and Macy’s, Inc. (M).

And the company is continuing to show impressive gains with its cloud business. For the quarter, revenues spiked by 69% to $2.41 billion and operating income jumped 187% to $687 million.

However, the growth path is showing some deceleration.

In the past two quarters, the AMZN cloud business grew at roughly the 80%-plus level. Perhaps there is some competition taking hold, such as from Microsoft Corporation (MSFT) or even players like International Business Machines Corp. (IBM). Let’s face it, the mega-tech operators are working hard to get a piece of the massive cloud opportunity.

But with Amazon stock at a hefty valuation — the forward price-to-earnings multiple at about 166X — performance has to be flawless. If anything, the miss on profits should be an ominous sign as AMZN may be once again getting back to its aggressive spending ways, with operating costs up nearly 21% in the latest quarter. Then again, Amazon has to invest in building its infrastructure, providing fulfillment (which has involved more with its own delivery trucks) and other services like video content, which can get expensive.

And besides: Amazon stock has already logged big gains over the past year, more than doubling.

In other words, it’s reasonable for investors to start taking profits.

Unfortunately, this could be a process that lasts for a few weeks or more. So investors looking at AMZN stock right now … well, it’s probably best to wait this downturn out.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2016/01/amazon-stock-amzn-fang/.

©2024 InvestorPlace Media, LLC