Amazon Stock Erases $210 Billion In One Day After Inflation Triggers Surprise Loss And ‘Ugly’ Selloff

Topline

Shares of Amazon collapsed Friday after the ecommerce monolith reported worse-than-expected earnings spurred by high inflation and lingering supply chain constraints, pushing the stock down more than 30% below its record high and extending a slate of massive losses among formerly high-flying technology firms.

Shares of Amazon have plummeted more than 30% from an all-time high set last year.

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Key Facts

Amazon stock tumbled 14% Friday to $2,485, logging its worst day since 2014 and wiping out about $210 billion in market value.

Spurring the losses, the Seattle-based giant on Wednesday reported an unexpected loss of $3.8 billion in the first quarter, or $7.38 per share, significantly worse than the $8.36 per share profit analysts were expecting and much lower than the profit of $8.1 billion a year earlier.

In a statement, CEO Andy Jassy chalked up the losses to ongoing inflationary and supply chain pressures, as well as “unusual growth and challenges” around the pandemic and subsequent war in Ukraine, saying the firm is “squarely focused” on improving productivity and cost efficiencies.

In a Friday morning note, Morningstar analyst Dan Romanoff lowered his price target for Amazon shares to $3,850 from $4,100, pointing out the firm’s operating margin was concerning, as inflation, excess labor and excess capacity ate away at income, and warning profitability challenges will “linger for a couple of quarters and perhaps into next year.”

“When you are one of the largest retailers in the world, adverse macroeconomic conditions and turbulent political landscape inevitably bite,” analyst Marina Koytcheva of CCS Insight said in emailed comments, agreeing that troubles for the firm could spill into next year despite a resilient Amazon Web Services business, which grew 37% in the first quarter.

Despite remaining bullish on the stock, Bank of America analysts also lowered their Amazon price target on Friday to $3,770, acknowledging that $4 billion worth of cost pressures in the first quarter will continue in the coming months, but saying they should be “manageable,” with freight costs already starting to fall and the company’s ability to limit new hiring this year.

Big Number

$149 billion. That’s how much Amazon founder and chair Jeff Bezos is worth, according to Forbes. His fortune plunged by more than $20 billion during the stock rout on Friday.

Tangent

Amazon’s certainly not alone in posting staggering losses this week. Shares of Tesla plummeted 12% Tuesday, pushing the firm’s market capitalization down by more than $125 billion. “Fears of slowing growth, higher interest rates, uncertainty about supply chains and geopolitical events have weighed on the broader market, but tech has carried the brunt of the pain,” Ally Invest strategist Lindsey Bell wrote in a Friday note, adding: “It’s been an ugly month for the technology sector.” Down 13% in April, the tech-heavy Nasdaq is on pace for its worst month since October 2008.

Chief Critic

“Amazon is well equipped to withstand cost pressure with greater efficiencies than most of its peers,” Bank of America’s Justin Post said Friday, adding: “The retail industry will eventually pass through higher costs to consumers.” Post also touted a “large profit pool” from Amazon Web Services and reiterated a buy rating for the stock.

Further Reading

Amazon Loses $3.8 Billion In Profits But Andy Jassy Is Not Concerned (Forbes)

Bear Market Looms As ‘Relentless Selling’ Batters Stocks—Not Even Lower Inflation Can Help Now (Forbes)