With the frenzied growth period of Amazon shares seemingly over, should the company’s stock be sold?

amazon stocks

Amazon.com (NASDAQ:AMZN) is in trouble after a stellar year of growth. The shares of the business tumbled almost 8% on Friday, July 30th, following which the stock saw its worst one-day percentage drop in more than a year.

That said, all was not lost in Q2. Sales rose 27% to $113.1 billion, just below the $115 billion average forecast of experts.  The quarterly profit came in at $15.12 per share, bettering the average expectation of $12.28.

Amazon’s advertising division, as well as Amazon Web Services, the company’s cloud subsidiary, both performed well. Quarterly AWS revenue increased 37% to $14.8 billion, the largest quarterly increase in two years. Other revenue, mainly advertising sales, rose 87% to $7.92 billion. Investors didn’t have much to cheer about except these great growth figures, though.

At a time when founder Jeff Bezos has handed the CEO position to Brian Olsavsky, shareholder concern mainly seems to be around the company’s main e-commerce operation, which is certainly, declining. The new CEO told investors on a conference call that the sales downturn would continue throughout the year.

Olsavsky told reporters that people are going out and doing things other than buying stuff on the internet, alluding to the economic reopening after more than a year of restrictions that favored online shopping.

In Q3, Amazon expects revenue between $106 billion and $112 billion, and an operating profit of $2.5 to $6 billion. Bloomberg found that analysts expected $8.11 billion in profit on $118.7 billion in sales.

Most of Wall Street analysts are still optimistic with regard to the company’s long-term future and e-commerce dominance. While some have lowered their price estimates due to slowing sales, many think any dip is a buying opportunity.

In light of disappointing 2Q21 earnings and a bleak 3Q21 forecast, analysts expect Amazon shares to fall. However, as a result of its loyal customer base, small business networks, and retail consolidation, they think Amazon should continue to grow its market share. Courtesy of it newer initiatives (grocery/pharmacy/fashion/home), many are of the view that Amazon is more valued.

In a survey featuring 50 analysts, all but one gave AMZN a ‘outperform’ rating. Their average 12-month price forecast was $4,169, representing a +25% increase.

Final word:

Amazon shares may fall further after the company issued poor Q3 e-commerce sales estimates. But given the company’s fast growing cloud and ad revenues, as well as its position in e-commerce which is still firm enough, this downturn provides an entry opportunity for investors.

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By Fool Co, August 16, 2022
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