Amazon reported its Q1 earnings yesterday, and despite hitting EPS estimates and achieving a tiny revenue beat, stock is down this morning by as much as 9%. It’s now down about 7%.
One factor could be that the company’s sales growth fell to 23% in Q1, down from 25% in Q4 and 29% in Q3. That’s not a big decrease, but investors wanted that number to get a boost this quarter.
Amazon is a company that is largely judged by its ability to grow revenue since it doesn’t have much in the way of profits.
Investors are patient, and don’t mind the lack of profits because they think Amazon is investing to grow the business. But when sales growth is decelerating it’s worrisome. It suggests the investment isn’t working out as well as they want.
Operating income guidance of a loss of $US455 to a loss of $US55 million was also well below the street at $US200 million.
Overall, investors saw Amazon’s quarterly results and were neither overly impressed (though both Amazon Web Services and International business outperformed) nor overly disappointed.
Unfortunately for Amazon, having nothing to be impressed about could be the reason for the stock drop, as investors would have preferred to see more growth. Amazon has always been a long-term focused company, however. With big recent investments in video content and rumours of an in-house delivery service in the works and Prime memberships continuing to increase, the company might start seeing a bigger pay-off soon.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.