- Amazon’s first quarter earnings were a big miss with the company reporting a loss due to its stake in EV start-up Rivian.
- The e-commerce company’s Q2 forward guidance also missed the mark, sending Amazon stock down 8% in after hours trading.
- Going forward, Amazon faces a number of continued headwinds that include inflation, rising rates and a potential recession.
Things look to be going from bad to worse at e-commerce giant Amazon (NASDAQ:AMZN).
AMZN stock had been down 15% year-to-date prior to the company reporting its first quarter results after the close of markets today (April 28). But once the earnings were announced, Amazon’s share price immediately fell another 8% in after hours trading.
Not only did the Seattle-based company’s first quarter numbers miss Wall Street forecasts, but the forward guidance issued by Amazon was also lower than analysts had expected, prompting the selloff in the company’s stock to accelerate.
Per Share Loss of AMZN Stock
As shocking as it may sound, Amazon reported an earnings per share (EPS) loss of $7.56 for the first quarter. That was a huge miss compared to positive earnings of $8.36 a share that was expected on Wall Street. The company attributed the loss to its stake in electric vehicle maker Rivian (NASDAQ:RIVN), whose own stock has imploded since its initial public offering (IPO) last November, having fallen 82% in that timeframe. Amazon said it recorded a $7.6 billion loss on its Rivian investment in the first quarter.
Amazon’s total net loss was $3.8 billion, or $7.56 per share, compared to a profit of $8.1 billion, or $15.79 per share, a year earlier. Revenue in the first quarter was slightly better than analysts had expected, coming in at $116.4 billion versus $116.3 billion expected on the street, according to Refinitiv data. However, Amazon’s revenue increase of 7% during the first quarter marked its slowest growth rate for any quarter since the dot-com bubble burst in 2001, and the second straight quarter of single-digit growth at the online retailer.
Amazon’s forward guidance for the current second quarter was lower than what analysts were looking for and that is what really sparked the selloff in the company’s stock. The online retailer forecast second quarter sales of between $116 billion and $121 billion, which was lower than the $125.48 billion that analysts had penciled in for Q2. The lower guidance seems to have unnerved investors who bid AMZN stock sharply lower immediately after the earnings were made public.
In a written statement that accompanied the earnings release, Amazon chief executive officer (CEO) Andy Jassy said, “The pandemic and subsequent war in Ukraine have brought unusual growth and challenges.” He added though that, “We see encouraging progress on a number of customer experience dimensions, including delivery speed performance as we’re now approaching levels not seen since the months immediately preceding the pandemic in early 2020.”
While those comments sound encouraging, they are likely to do little to reassure analysts and investors of Amazon’s progress in the near-term. After trading sideways for most of last year, AMZN stock has been trending lower in recent months as the company grapples with surging inflation, rising interest rates, war in Europe, and a growing number of forecasts calling for a global recession. Really, the company and its stock have underperformed since Jassy assumed the CEO role from company founder Jeff Bezos last summer.
Be Careful With AMZN Stock
While much of Amazon’s bad print can be blamed on its stake in electric vehicle start-up Rivian, the slowing sales and weaker than expected second quarter forecast are cause for concern and likely to weigh on Amazon’s stock in the short-term.
While the stock is not experiencing the same type of implosion seen after Netflix’s (NASDAQ:NFLX) Q1 earnings, they are never the less falling further and investors should be careful. Given the current situation, AMZN stock is not a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.