Amazon shares tumble on a bummer forecast, highlighting a Q3 theme for tech titans
Primed for a slowdown… Yesterday Amazon became the latest techie to deliver uninspiring third-quarter earnings. The ecomm staple missed both sales and profit expectations, but what disappointed investors most was a weak forecast for this quarter. After the bell, Amazon shares tumbled by as much as 20%.
- The bull(ish): Amazon’s sales returned to double-digit growth, and it posted its first profit of the year (though it was 9% lower than last year).
- The bearish: Amazon expects this holiday quarter’s sales to be up just 2% to 8% from last year — a major growth slowdown from previous quarters.
- The bear: Investors sent Amazon shares plunging, marking the second time this year the stock has suffered a double-digit-percentage selloff.
Quote of the quarter… from the mouth of Amazon CEO Andy Jassy to investors’ ears: “There is obviously a lot happening in the macroeconomic environment.” Amazon’s much-lower-than-expected Q4 sales guidance includes a big hit from the strong US dollar.
- Because the USD has appreciated relative to other currencies, foreign earnings are now worth less in USD. That’s a problem, because S&P tech giants earn about 60% of their revenue abroad.
- Amazon’s international sales fell 5% year over year, but they would’ve been up 12% if it weren’t for changes in foreign exchange rates.
Big Techies are in the same boat… Oil titans like Shell are still reporting booming profits, while big food staples like Coke are raising their outlook on upbeat earnings. But for the likes of Amazon, Google, and Meta, the pandemic growth spurt is over — and the “macroeconomic” problems have landed. Now investors’ expectations are being adjusted as forecasts come back down to earth.