Amazon Investors Take Real Control.

  Amazon Investors Take Real Control.  It was a fact that the pandemic could not continue to grow indefinitely.   For years, Amazon AMZN (NASDAQ) $3.357,45 -8,79 (-%0,26)  has brought many competitive advantages by making it feel like an always-on stock. During the pandemic, it entered the lives of many Americans, making their work easier and creating addiction. Although holding the stock every year makes investors happy, it was a bit of a shock to see Amazon's stock price drop nearly 8% after its Q2 earnings report. The tech giant reported revenue growth of 27% to $113,1 billion, despite missing analyst consensus of $115,1 billion. The company delivered another round of rapid growth, with earnings per share rising to $15,12 from $10,30, ahead of estimates of $12,22. After the difficult periods of the pandemic, the slowing growth of the company showed itself in the third quarter. As a result, it only called for operating income of $2,5 billion to $6 billion, below the $6,2 billion it reported in the quarter a year ago. But the market response shows that investors think the pandemic winds will last forever, even though consumer spending priorities have changed recently. CFO Brian Olsavsky gave some insight into the earnings call, noting that Amazon's revenue growth rate was 20% before the pandemic, but has increased to 40% for most of last year. Also he added that it is normal for him to return to old earnings after the pandemic. But beyond that, there is another challenge Amazon is facing.  

It was a fact that the pandemic could not continue to grow indefinitely.

The law of large numbers

For Amazon, which brought in $386 billion in revenue last year, analysts expect it to generate close to $500 billion this year. It seems difficult for the company, which has earned such high earnings last year, to show the same performance after the pandemic. It should not be forgotten that growth rates slow down as businesses grow. It is a general rule already known as the law of large numbers.

The good news

Its high-margin businesses such as Amazon Web Services, third-party marketplace and advertising provide the Company with large additional gains in profitability. Profit growth will remain strong thanks to these accelerations.

Different Perspectif

Despite Friday's sales, Amazon's share price is still up 80% from early 2020, representing close to $1 trillion in market capitalization. Although a post-pandemic shrinkage is expected, Amazon is still one of the most bulletproof stocks on the market.

Amazon Investors Take Real Control.

Source: The Motley Fool

 

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