Amazon (AMZN) Stock: Should You Be Concerned About Missed Earnings

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Amazon.com, Inc. (NASDAQ: AMZN)

Amazon is having a rough time in the market today after an 8% drop off in Friday’s trading session. However, the declines are definitely justified. Unfortunately, the company missed earnings expectations in a big way. Now the big question is… Should you be concerned about the missed earnings? Today, we’ll talk about what we saw from the earnings report, why I believe AMZN missed expectations, how investors reacted to the news, and whether or not the bloodshed on the stock is likely over.

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AMZN Missed Earnings In A Big Way

On Friday, before the opening bell, Amazon released its earnings report for the most recent quarter. Unfortunately, both earnings and revenue came in below expectations. Here’s what we saw from the report:

  • Earnings Per Share – In terms of earnings per share, analysts expected AMZN to generate $1.61 in the quarter. Unfortunately, the company missed this big by producing only $1.00 per share in earnings. This represents a negative earnings surprise in the amount of 38% and the first time the company has missed on earnings expectations since September of 2014.
  • Revenue – When it comes to revenue, AMZN reported that in the quarter, it generated $35.747 billion. Unfortunately, this also came in well below expectations. When it comes to revenue, analysts were expecting AMZN to produce $35.9 billion for the quarter. This miss represents the first time the company has missed top-line expectations since December of 2014.

How The Market Reacted To The News

Considering the fact that there are few factors that have the potential to move the needle like earnings, it’s no surprise that investors reacted to this release in a negative way. On Friday, AMZN posted a loss of around 8% on the trading session. Unfortunately, the movement in the market today is also negative. Currently (10:12), Amazon’s stock is trading at $577.70 per share after a loss of 1.58% so far today!

Should Investors Be Concerned

In the short term, I do believe that this is going to be a big hit for Amazon. However, there’s a very good reason that AMZN produced the miss. Global economic conditions are far from positive. When economic conditions are poor, consumers tend to save rather than spend. This had to weigh on AMZN during the most recent quarter. Unfortunately, I believe that the miss on earnings here speaks volumes with regard to what we can expect to see from the rest of tech for the most recent quarter. However, in the long run, I still have a relatively bullish opinion with regard to what we can expect to see from Amazon.

Over the past couple of years, AMZN has positioned itself to be the undisputed king of online retail in the United States, and that’s not likely to change for quite some time. First and foremost, the company’s small margin business model attracts the masses as they are able to purchase high quality goods at a very low price. On top of the low margins, the Amazon Prime offer drives even more revenue and consumer excitement around the brand. However, perhaps most importantly, the big spending that AMZN was doing in 2014 has led to a slew of fulfillment centers around the United States and the rest of the world. As a result, the company’s infrastructure now allows it to ship products faster than just about any other retailer online today. This is a key driver in leadership in the online retail space and will likely lead to long-run gains. So, while we may see a bit more by way of downward movement in the short term, the long-term outlook is looking great for AMZN.

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What Do You Think?

Where do you think AMZN is headed moving forward? Let us know your opinion in the comments below!

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