Shares of Amazon (NASDAQ:AMZN) were up roughly 6% after market close on Wednesday. But not everything has been so glamorous for AMZN stock, especially in August 2019.
Amazon shares fell substantially toward the end of July and then were up and down for the majority of August. With all of that in mind, here are three reasons why AMZN was down last month.
AMZN Dealt With an Earnings Miss
Amazon announced its second-quarter earnings toward the end of July and in some areas, they were in line with what investors expected. The company’s growth and revenue were up and Prime memberships are increasing at a steady pace.
However, Amazon’s earnings fell short of expectations, mostly due to the $800 million the company invested in one-day shipping for Prime members. Still, investors were expecting $5.57 per share, so with the actual earnings at $5.22 per share, the company fell short by quite a bit.
Amazon Web Services also missed after several quarters of strong growth. The company’s digital ad business slowed as well.
Increased Competition
Amazon, Walmart (NASDAQ:WMT) and Target (NASDAQ:TGT) are engaged in a fierce battle to see who can gain retail market share. It’s hard to match Amazon’s level of convenience but the other two stores are doing their best.
Walmart is working hard to match Amazon’s one-day shipping guarantee and both companies have improved their online delivery and in-store pickup features. Walmart and Target even offered sales to try to compete with Prime Day back in July. Some of these efforts were successful and both companies managed to steal customers from AMZN.
Most recently, Walmart and Target have been capturing the majority of back-to-school sales. Turns out, most parents would rather visit a brick-and-mortar store than do their back-to-school shopping online.
A Promocodes.com survey found that Walmart was the No. 1 choice for back-to-school shopping; 38% of shoppers visited Walmart, 26% went to Target and 19% used Amazon.
The Company Is Struggling With Its Third-Party Sellers
A couple of weeks ago, the Wall Street Journal revealed that Amazon currently hosts thousands of unsafe or incorrectly labeled products on its site. Most of these are offered by third-party sellers and the items offered could be anything from children’s toys to medications.
This happened because AMZN supposedly retains very little control over its third-party sellers. The Journal documented more than 4,000 products that were misleading, unsafe or even banned.
This is a common problem for sites hosting third-party sellers. Facebook (NASDAQ:FB) and eBay (NASDAQ:EBAY) both dealt with these same types of issues. However, Amazon did respond with a blog post outlining its compliance program for sellers.
Amazon Stock Should Be Just Fine
Despite the company’s rocky couple months, analysts are enthusiastic when it comes to AMZN stock. The 29 analysts reviewing the stock gave it a buy rating and the overall consensus is that the stock has much more room to grow.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.
