The Amazon share price tumbled by as much as 3% on Monday following a weaker than expected quarterly earnings report. The bleak report and dismal forecast for the next quarter brought the Amazon stock price crashing down to just $2,408 – the tech giant’s worst performance in over a year.
It all follows a tumultuous Friday where Amazon revealed an earnings report that showed the ecommerce giant had experienced its first quarterly loss since 2015. Much of this was reportedly down to the prevailing economic conditions of spiraling inflation rates and war in Ukraine, but Amazon has also been hit hard by ongoing labor problems and supply chain issues.
The slowdown in online shopping has perhaps had the hardest impact on Amazon’s stock price. Much of this is due to the fact that customers are returning to shopping habits not seen since the pandemic first struck.
This was enough to slow the revenue growth for Amazon to just 7% in the first quarter of 2022 and cause a loss of $3.8 billion in the same period. Such results are all the more remarkable considering that Amazon was enjoying profits of over $8 billion a year ago when the pandemic caused more people to take their shopping online. But with operating costs continuing to rise faster than online sales, it means that Amazon has suddenly become less profitable.
Away from ecommerce, Amazon’s balance sheet has also been hard hit by some extravagant spending. The massive stake in the Rivian electric vehicle manufacturer could take many years before it pays off.
Plus Amazon has also experienced dwindling growth in revenues from its streaming services such as Prime, and advertising sales also failed to be what analysts expected. The one positive for Amazon came with the fact that its cloud computing business saw a sales rise of 37% in the first quarter of the year. All of which is enough to suggest that Amazon Web Services should be able to withstand increased pressure from the likes of Google and Microsoft.
Where will Amazon stock go from here?
The bad news is that Amazon’s problems look like they are just getting started. This is because its report signaled further economic uncertainty for the remainder of 2022. The current quarter is expected to bring in an operating income that could be anywhere between a $3 billion profit or even a $1 billion loss.
However, Amazon bosses were keen to state that the brand was overcoming the current capacity and labor problems that recently led to unionization at a warehouse in Staten Island. With billions already spent on overcoming the ongoing supply chain issues, Amazon will be hoping that good fortune is just around the corner.
Thankfully, it’s just a matter of months until Amazon’s next Prime Day lands in July that should be enough to give the brand a much-needed lift in revenues. Plus with plans to bring spending in line with costs in the second half of 2022, there’s still plenty of room for optimism among Amazon investors.