Investors Should Watch Amazon's Slowing Growth.

  Investors Should Watch Amazon's Slowing Growth. Sales growth in the e-commerce giant's core business slowed, and profitability was also under pressure after the boom during the pandemic. For investors, Amazon.com (NASDAQ:AMZN) reported lower-than-expected results at the end of the third quarter, seemingly disappointing for the last quarter as well. However, while Amazon shares initially pulled back following the results, shares have since been able to retrace some of that lost ground. But despite this, Investors are not worried in the slightest by this slowdown.

Another quarter to slow growth.

The slowdown was particularly noticeable, even though Prime Day ran its shopping bonanza in June of this year compared to October 2020. Aside from the slowdown in growth, Amazon generally beats profit forecasts by a wide margin. Amazon's fourth-quarter guidance also fell short of analysts' forecasts. Since the earnings were announced, analysts have cut their full-year 2021 and 2022 earnings forecasts for Amazon by about 22% each.

Investors Should Watch Amazon's Slowing Growth.

Putting results in context

Amazon's main retail business is currently facing a number of problems in the US due to inflation, rising freight costs and labor shortages. Meanwhile, the pandemic brought significant e-commerce growth from 2021 and beyond to 2020. But Investors shouldn't assume that Amazon's sales growth will accelerate dramatically in 2022. Also, persistent concerns about the pandemic continue to reduce store traffic to some extent, suggesting that consumers have not yet finished shifting their spending to physical retailers. What is known is that short-term cost headwinds and an investment cycle now put pressure on margins. Temporary headwinds may have made shareholders overly optimistic about Amazon's long-term margin potential.

Can AWS save the day?

It seems that it was the acceleration of Amazon Web Services (AWS) that saved the fastest growth and situation in Amazon's quarterly report. Thus, AWS has clearly proven to be an extremely valuable business due to its high margins and rapid growth. Regardless, investors should keep a close eye on Amazon in 2022 to see if the Company's core business can regain its former enthusiasm.  

Source : The Motley Fool

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