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Amazon Stock Price Facing Headwinds After Negative Profit Growth

Amazon (NASDAQ: AMZN) stock price is likely to face pressure in the coming days. This is because its third-quarter results have strengthened the bear’s case. The company has missed revenue and earnings estimates. In addition, the profits declined when compared to the same period last year.

Amazon stock price has been trading in the range of $1700 to $1800 level over the past couple of months. AMZN shares are struggling to breach the physiological mark of $2000. The shares are down 12% from 52-weeks high of $2035 that it had hit three months ago.

AMZN Amazon.com, Inc. daily Stock Chart

Soft Q3 Results Could Negatively Impact Amazon Stock Price  

The company has reported lower than expected growth in revenues and earnings. Its revenue jumped 24% compared to the year-ago period, down from the previous revenue growth range of 30% to 40%. The softening revenue growth is impacting investor’s sentiments. Its AWS net sales came in at $9B, down from the expectations for $9.19B.

Amazon Stock Price Facing...

In addition, AMZN has missed earnings estimates by a wide margin of $0.32 per share. Its operating income declined to $3.2 billion in Q3 from $3.7 billion in the year-ago period. Moreover, the company experienced a substantial drop in net earnings. Its net earnings dropped to $2.1 billion from $2.9 billion in the same period last year.

Amazon Stock Price Facing...

The company believes that they are taking innovative steps to expand its customer base. “We are ramping up to make our 25th holiday season the best ever for Prime customers — with millions of products available for free one-day delivery,” said Jeff Bezos, Amazon founder, and CEO.

Revenue Growth is Likely to Decelerate

The company has presented a lower than expected outlook for the fourth quarter. It expects fourth-quarter revenue to stand around $80B-$86.5B, down from consensus for $87.2B.

The revenue guidance reflects 11% to 20% growth from past year period. Moreover, the company’s guidance for operating income of $1.2B-$2.9B reflects a huge decline from operating income of $3.8B in the previous year period. Overall, Amazon stock price is likely to face headwinds in the short-term.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.