Amazon.com, Inc. (AMZN) marked its 20th anniversary this year, but AMZN sure didn’t celebrate in style. Indeed, Amazon stock was a huge disappointment in 2014, battered by everything from surprisingly poor quarterly results to disastrous sales of its debut smartphone.
Amazon stock lost 24% for the year-to-date as of Friday’s close, while the S&P 500 was up almost 13%. That’s right — a cheap and easy benchmark index outperformed Amazon stock by close to 40 percentage points this year, all while carrying far less risk.
True, AMZN founder and chief Jeff Bezos pursued his motto of “Get Big Fast” as diligently as ever in 2014, and that worked wonders for the top line. But it was poison for Amazon stock and the company’s market value. Heck, AMZN saw roughly $40 billion in shareholder value go poof this year.
Bezos, of course, doesn’t care. As far as he’s concerned, the year went according to plan, with AMZN revenue on track to increase 20% to more than $89 billion in fiscal 2014. As we’ve noted before, Bezos is playing a very long game, here. Net losses are acceptable as long as AMZN remains on track for global domination.
Anyone investing in Amazon stock needs to be comfortable with Bezos’s plan for deferred rewards, because the strategy can be a real portfolio killer in the short term.
Here’s a look back at key events that clobbered Amazon stock in 2014:
Amazon Stock: Jan. 30
Amazon stock took the first of many beatings this year thanks to disappointing quarterly results. AMZN’s fourth-quarter results — which included the all-important holiday-selling period — missed Wall Street’s top- and bottom-line forecasts. Even worse, AMZN issued soft earnings and revenue guidance. If a beat-and-raise quarter is a stock’s best friend, then a miss-and-lowball report is one of its worst enemies.
Aftermath: Amazon stock plunged 11% in the regular trading session following the after-hours report. Indeed, AMZN soon broke down through $350 a share and never came close to $400 again in 2014.
Amazon Stock: March 18
Amazon stock looked to be on the mend by late winter, as the market applauded Amazon’s decision to hike the price of a subscription to its Amazon Prime service by 20 bucks. Wall Street even downplayed the risk of a mass exodus of Prime customers. A sudden interest in profits? The last thing investors wanted was for Amazon to enter yet another costly new field of competition. So when rumors broke that AMZN would get into the streaming TV business (as it ultimately did with Fire TV), the market threw up.
Aftermath: Amazon shares reversed course and lost 7% over the course of a trading week.
Amazon Stock: April 24
AMZN earnings for its fiscal first quarter matched Wall Street’s bottom-line estimate and even exceeded analysts’ average view for revenue, but that wasn’t good enough for the market. The Amazon Prime price hike and launch of Fire TV over the course of the quarter essentially canceled each other out sentiment-wise, leaving the market to focus on Amazon’s rising costs and lower margins. Weak revenue guidance likewise added to the gloom on Amazon stock.
Aftermath: Amazon stock another tumbled 10% in the session following the company’s after-hours earnings report.
Amazon Stock: July 24
Amazon stock sold off for a couple of weeks after earnings, finally finding a floor in early May. From that point, AMZN went on an amazing spring and early summer run. Indeed, Amazon stock rose more than 24% from May 8 to July 24. Shares were back above $350 after falling as low as $288 fewer than three months back.
And then came another ugly quarterly report. Amazon posted an adjusted loss of 27 cents a share in Q2, much wider than the loss of 15 cents the Street was modeling.
Aftermath: Amazon stock dropped nearly 10% in the session following its after-market earnings release.
Amazon Stock: Sept. 5
Amazon stock found a floor and rebounded once again by late summer — and once again it was more of dead-cat bounce than the start of something new. AMZN was closing in on retaking $350 a share in early September until it came up against a couple nasty headwinds. October’s market-wide selloff first started percolating in September as volatility picked up. Amazon stock also was hit by a price cut on the Fire Phone — a confirmation that the company’s debut smartphone was a dud.
Aftermath: The dead-cat bounce made it until Sept. 5 before coughing up a hair ball. By month’s end, Amazon stock lost 7%.
Amazon Stock: Oct. 23
The market’s ugly autumn selloff bottomed out by mid-October, but Amazon stock still had a way to go, thanks to — you guessed it — another nasty quarterly report. AMZN notched a 52-week low — and, indeed, found itself down nearly 30% on the year — after posting yet another wider-than-expected loss. The Street was looking for a fiscal Q3 loss of 74 cents a share, and yet AMZN managed to record a 95-cent loss.
Aftermath: The selloff following earnings was short-lived and set AMZN up for yet another dead-cat bounce. (This last one ended when AMZN again cut the price of the Fire Phone after in late November.) That said, shares are negative for the month of December and obviously a lost cause for all of 2014.
Yes, Amazon stock might enjoy a better 2015, but only if investors can look past a consistent lack of profitability and continually contracting margins.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.