HomeNewsAmazon dives 12% on poor quarterly earnings: is it safe to buy it here?

Amazon dives 12% on poor quarterly earnings: is it safe to buy it here?

Mircea Vasiu

Amazon reported the financial results for the first quarter of the year. Huge cash outflows spooked investors, and the stock dropped by more than 12%. 

This week, companies from the US tech sector reported their quarterly financial performance. Yesterday, it was Amazon’s time to do so.

Investors expected EPS of $8.49 in the quarter, but they were in for a huge surprise. Instead, Amazon lost money on the quarter, the bottom line indicating EPS of -$7.56 billion.

Operating cash flow shows massive outflows. It decreased by 41% to $39.3 billion for the trailing twelve months. Also, free cash flow decreased too.

Interestingly, net sales in the quarter increased by 7% when compared to the same quarter last year. However, operating income declined, and so the net result showed a quarterly loss.

The stock reacted promptly. It dived about 12%, and it is down -25.64% YTD.

AWS continues to have an impressive growth rate

AWS grew by 34% annually over the last two years, and 37% YoY in the first quarter. While impressive and contributing a lot to the company’s revenues, investors found it interesting that the growth rate is less than the growth rate of similar products from competitors such as Google or Microsoft.

In other words, while growing, AWS is currently losing market share to competitors. Management blames the pandemic and the war in Ukraine for the poor results. 

This is the first loss in seven years for Amazon.

What do analysts say? 

Analysts were not impressed by the poor results. As a matter of fact, most analysts maintained their buying ratings in the aftermath of the quarterly earnings report. 

For example, Baird Patrick & Co, Deutsche Bank, and RBC Capital Markets maintained their buy rating with a price target of $3,750, $3,500, and $3,500, respectively. 

All in all, the quarterly report shows massive cash outflows, massive share issuance, massive costs, and, above all, losses. On top of that – AWS is losing market share.