Amazon Stock Crushed After Earnings Beat. It’s No Big Deal.
Yes, investors always have reasons to get nervous, and this time the reason isn’t the earnings themselves. Amazon.com (ticker: AMZN) reported $15.12 in unadjusted per-share earnings. Wall Street was looking for $12.28 a share. Instead, the company forecasts a slowdown in online sales for the coming quarter.
With Thursday’s earnings and Friday’s drop, it is the ninth earnings beat during the past 12 quarters, and the sixth time it has dropped following a beat. In other words, there’s a 67% chance that Amazon stock drops no matter how good the earnings are.
Investors focused on the third quarter, however, might be missing the point. What investors should remember is at the start of this series—the third quarter of 2018—Amazon stock was trading at about $1,782 a share. It closed Friday at almost $3,328 a share. That works out to an annual average return of roughly 25%. Not bad.
Quarterly reports are funny things. More often than not they confirm what investors already know. Take
(CAT). Cat and Amazon have little in common except they both reported between the close of trading Thursday and the opening of trading on Friday. Cat’s quarter shows strong demand as the economy recovers and pressure from rising commodity costs. Not a shocker. And yes its stock finished down 2.7%.
Quarterly reports rarely change an investment thesis. Yes, sometimes true bombshells get dropped. For Amazon, it isn’t likely that online sales slowing coming out of the pandemic qualifies as the bombshell Friday trading seems to indicate though.
That’s our hunch.
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