$Amazon.com(AMZN)$stock price is down 38%, which is 58% more than the NASDAQ has fallen, and the largest drop in four months since the dotcom bubble in the 90s. 480 billion dollars is how much Amazon’s market cap has dropped this year!!!
Amazon in the last three years has risen heavily, becoming a trillion dollar company, but on the current path, it could lose that status soon.
Lets look at Amazon’s numbers and see what’s causing this and if this is a short term issue, versus a long term problem for the companies stock. Starting off, a look at revenue and profits.
Revenue
116.4 billion was how much Amazon made in the first three months of 2022. 108.5 billion was the revenue up for the first three months of 2021, up 7.4%, although that’s good, but profits on surface are a bigger issue.
Profit
Amazon lost 3.8 billion for quarter one of 2022. Comparing that, they made 8.1 billion in profit for 2021 in that quarter. A few reasons were associated with that loss.
1. Offsetting losses, with their stake in the electric car company, Rivian. Rivian’s stock crashed and has lost over 70% of it’s value this year. Amazon owns 18% of the company, so the loss on the investment this year has been over 10 billion dollars, from stock price drops. That crash in the first quarter of 2022 was reported in offset losses for the company.
2. COVID, where despite the company growing, they actually projected more revenue in 2022. Amazon made 108 billion in quarter one of 2021. Comparing that, they made 75 billion in that same quarter in 2020. A 44% growth from 2020 to 2021 compared to a 7.4% growth in 2021 to 2022. Apparently Amazon invested with the expectation of hitting closer to a 15-20% growth rate and paid consequences of that.
Neither of these things are good news, but shouldn’t really justify the crash it had. A few possibilities:
Profit Margin
Amazon made 470 billion in 2021. An 80 billion dollar jump from 2020 in revenue. The problem though was profit. Amazon made a profit of 33.3 billion in 2021. A 7% margin, lets compare that to other larger tech companies:
Apple made 366 billion in 2021 + profit was 94.6 billion = a 25.7% margin
Microsoft made 168 billion + profit was 61 billion = a 36% margin
Google made 257 billion + profit was 76 billion = a 29.6% margin
Facebook made 118 billion + profit was 39 billion = 33% margin
Apple, Microsoft, Google and Facebook are all mega margin companies, which while not as big as Amazon for revenue, all have margins over 20% and closer to if not over 30%. Amazon at 7% suffers from the fact they are a retailer/logistics company that uses technology and not exactly a tech company like the other four. That puts that in a zone, where they have pretty slim margins.
Walmart made 559 billion in 2021 + profit was 13.7 billion = a 2.2% margin
Target made 93.5 billion + profit was 4.4 billion = a 4.7% margin
Lowe’s made 89.6 billion + profit was 5.8 billion = a 6.5% margin
Amazon has since founding been linked as a tech stock and for nearly 30 years seen that way to people, but despite being on the internet, it has margins pretty similar to a traditional retailer.
Despite the reality it’ll likely be the largest retailer in the world by 2025 and highest revenue company, it still is a retailer and unlikely to ever break a 10% margin, unless its web services grow noticeably. It’s sort of an issue which it seems like Netflix is having. Started off being treated as a tech company, but looking at margins, growth issues and challenges as a business, it’s a media company.
This is why Amazon could be the first company destined to become the largest in the world that’s also worth shorting long term. Let me know whatyou think! Thanks @Daily_Discussionfor the opportunity! HUAT AH!
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