- Amazon’s stock shed about $US40 billion in market value Friday after the ecommerce giant gave fourth-quarter guidance below Wall Street estimates.
- The shares also plunged as Amazon reported a weaker profit than expected as spending for its Prime One-Day delivery program ramps up.
- Analysts are coming to the stock’s defence, maintaining “buy” ratings as they see the company’s jump in spending as a catalyst for growth.
- Here’s what Wall Street is saying about Amazon’s third-quarter results.
- Watch Amazon trade live on Markets Insider.
The sharp sell-off came after Amazon gave softer fourth-quarter guidance than analysts and investors were hoping for.
The mid-point of Amazon’s fourth-quarter revenue guidance came in at $US83.3 billion, while the consensus analyst estimate was $US87.4 billion. For operating income, the company is expecting $US2.1 billion at the midpoint, shooting 50% below consensus forecasts of $US4.2 billion.
Amazon’s third-quarter profit also fell below estimates as its accelerates spending to shave a day off its Prime Two-Day shipping program. The company posted $US4.23 in earnings per shares, missing expectations of $US4.62 per share.
Despite the market’s rebuke of Amazon’s results, many analysts are standing by the stock – and some are even saying to take advantage of the dip.
The e-commerce giant has overwhelming bullish support from Wall Street with 54 “buy” ratings, two “hold” ratings, and zero “sell” ratings.
While some analysts are slightly lowering price targets following the results, many are reiterating their support and “buy” ratings as they view Amazon’s spending on One-Day shipping and Amazon Web Services as an effort to grow the business.
Here’s what Wall Street is saying following Amazon’s third-quarter results.
Bank of America: “While expenses are ramping for One-Day, we think AMZN should find efficiencies over time.”
Price target: Cut to $US2,160, from $US2,250
“While expenses are ramping for One-Day (4Q profit outlook high end of $US2.9bn is well below Street at $US4.3bn), we think AMZN should find efficiencies over time (similar to Two-Day),” Bank of America analysts wrote in note titled ‘Amazon being Amazon: Big investments today for future growth’ on Friday.
The analysts added: “We continue to anticipate a strong benefit from One Day shipping in 2020 (possible 1Q’20 acceleration). We are slightly lowering our PO to $US2,160 to reflect lower estimates, but continue to see healthy upside for the stock.”
Piper Jaffray: “Through one day shipping, Amazon has accelerated global retail y/y revenue growth.”
Price target: Lowered to $US2,150, from $US2,225
“Through one day shipping, Amazon has accelerated global retail y/y revenue growth by an average of 300bps in the past two quarters,” Piper Jaffray analyst Michael Olson wrote in a note to clients on Friday.
Olson continued: “With an even more aggressive push for one day in Q4, and a 700bps easier comp (FXN global retail y/y rev growth), we believe revenue upside potential is high.”
Goldman Sachs: “We continue to believe AMZN represents one of the best risk/rewards in Internet.”
Price target: Reduced to $US2,200, from $US2,350
“With revenue growth accelerating for the second quarter in a row and a strong history of the company’s investments in fulfillment and infrastructure driving faster growth and high returns we continue to believe AMZN represents one of the best risk/rewards in Internet,” Heath Terry, an analyst at Goldman Sachs, wrote in a note to clients Friday.
UBS: “We see any post-quarter share weakness as a good entry point.”
Price target: $US2,100
“While forward margin pressure can bring additional investor debates, AMZN’s track record of ROI production against investments seems to be getting heavily discounted,” UBS analysts said in a note to clients Friday.
UBS continued: “We remain Buy rated (with a $US2,100 PT) and we see any post-quarter share weakness as a good entry point against the long term narratives.”
JPMorgan: “We’d be buying the pullback in shares.”
Price target: Dropped to $US2,200, from $US2,300
“We like AMZN’s strategy w/P1D as it raises the bar in e-commerce yet again & accelerates the top line, even at the expense of profitability,” JPMorgan analyst Doug Anmuth wrote in a note to clients Friday.
Anmuth added: “No company we cover has earned the right to invest more than AMZN, & we’d be buying the pullback in shares.”
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