Once the apex predator of the broader retail segment, Amazon (NASDAQ:AMZN) now finds itself struggling amid growing signs of a worsening consumer economy. In particular, FedEx (NYSE:FDX) suffered a catastrophic loss after it disclosed a disappointing pre-earnings announcement on Thursday. While FDX stock tanked about 22%, AMZN stock lost approximately 3% in the afternoon session.
Interestingly, United Parcel Service (NYSE:UPS) also slipped on Friday, to the tune of 5%. UPS likely fell in sympathy as both courier services align with the wider e-commerce industry. For FedEx, the company now anticipates adjusted earnings per share (EPS) of $3.44 for the fiscal year 2023. However, Wall Street previously anticipated adjusted EPS of $5.14. Also, the downgraded guidance dipped conspicuously below the year-ago tally of $4.37 per share.
FedEx’s management team identified macroeconomic trends that “significantly worsened later in the quarter, both internationally and in the U.S.” While this directly hurts FedEx shares, AMZN stock likely absorbed a hit due to implications for the underlying business. With consumers facing an uncertain future, many put discretionary spending on hold.
Should this trend continue, AMZN stock may have further to decline. To be fair, JPMorgan’s Jack Atherton stated in part that “Amazon has piled money into its logistics capability over the past few years, to the point it has excess capacity for its own needs and is hungry for more share.”
Analysts Drop the Axe on AMZN Stock
While AMZN stock fortunately avoided the hefty losses seen in the courier segment, it’s hardly out of the woods. Indeed, analysts, who “have lowered their quarterly profit forecast by about 43%,” according to Barron’s, are coming after the e-commerce giant.
Recently, Goldman Sachs lowered its third-quarter sales estimate to $127.6 billion from $128.5 billion. As well, the research arm of the financial institution lowered its operating margin forecast to 2.6% from 3.9% and dropped its estimate for earnings per share to 22 cents from 37 cents. The firm worries that rising labor, freight and energy costs are eating into margins.
According to the U.S. Bureau of Labor Statistics, the purchasing power of the dollar declined by 5.34%. While such currency erosion impacts everybody that holds greenbacks, the circumstance has been particularly brutal for lower-income workers.
To be sure, the Federal Reserve signaled inflation as its top priority, seeking to raise rates to combat rising prices. However, purchasing power only increased 0.3% from June through August. This circumstance implies that the Fed must get even more aggressive with its rate hikes.
The central bank also aims to implement a soft landing for the economy. However, such an outcome features no guarantees, posing problems for AMZN stock and its ilk.
On the date of publication, Josh Enomoto 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.
