Amazon Shares Drop Over 7% as Earnings Miss Target

30 Jul 2021 · 3rd Party Analysis

Amazon’s Profit Triples in a Quarter of $100bn Sales

WRITTEN BY ThorFX

In Summary

  • Amazon stock declined sharply by 7.44% in after-hours trading
  • The company missed analyst expectations on earnings by about $2bn

Amazon Shares Drop Over 7% as Earnings Miss Target

Amazon missed Wall Street sales target in the latest quarter despite revenue being 27% higher than what it was a year ago. Amazon finished the second trimester of the year with a revenue of $113.1bn, about $2bn less than analysts’ prediction of $115.4bn. Shares in the e-commerce and cloud-computing giant were down 7.44% in after-hours trading.

Amazon was one of the businesses that significantly expanded its presence during the pandemic. The Seattle-based tech juggernaut made a profit of more than $30bn in the past year as consumers flocked to online shopping while the world at large was under some form of a lockdown. Amazon’s cloud-computing business gathered pace when work needs were met at home as companies allowed employees to work remotely.

Particularly during the pandemic, investors were cheering Amazon’s results coming above estimates. While Amazon’s profits of $7.8bn in the latest quarter were more than what analysts had expected, shares in the tech giant slumped due to the company’s warning that it would be difficult to sustain the pandemic-fueled rally.

The latest earnings report marked Jeff Bezos’ final quarter as the CEO of the company. Mr Bezos stepped aside earlier in July, 25 years after he founded the company. He was replaced by Andy Jassy, the former head of the AWS division.

“Over the past 18 months, our consumer business has been called on to deliver an unprecedented number of items, including PPE, food, and other products that helped communities around the world cope with the difficult circumstances of the pandemic,” Jassy said in a statement.

The forward guidance offered by the company projects Amazon sales for the current quarter to arrive between $106bn and $112bn. Operating income is expected to come between $2.5bn and $6bn.

Stock Market Speeds Up Besides Weaker US Growth

Meanwhile, the broader stock market on Thursday accelerated even after weaker-than-expected US growth data. The move to the upside by major US indexes followed US gross domestic product data showing the economy grew at an annualized rate of 6.5% in the second quarter.

The figure was below the estimation of 8.5% expected by economists polled by Reuters. Nevertheless, the blue-chip Dow Jones spiked to an intraday record and managed to close the day higher by over 150 points. The S&P500 pushed higher by nearly 0.50%, while the tech-heavy Nasdaq Composite was moderately in the green as it climbed 0.11% on the day.

Stocks climbed on optimism that due to the weaker GDP data, the Federal Reserve would maintain its monetary stimulus that has buoyed the market since the pandemic began in March last year.

Futures contracts on Friday indicate a sharp drop in the Nasdaq Composite index. Nasdaq futures fell more than 1%, or about 200 points, in pre-market trading in the last session of July. S&P500 futures and Dow futures are also on the downside today.

Bitcoin and its crypto asset peers are floating around the flatline on Friday. The price of bitcoin is currently gyrating right under the $40,000 mark after it snapped its longest winning streak in 2021 of eight consecutive days of gains.

European markets on Friday opened in negative territory after a relatively strong performance on Thursday. The pan-European Stoxx 600 yesterday closed higher by 2.14 points, or 0.46%

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