Shares of technology mega-giant Amazon.com, Inc. (NASDAQ:AMZN) dropped substantially last week on earnings that were digested by the market as representing a significant amount of downside due to a top line revenue miss of approximately 1%.
Perhaps more concerning to many investors is the revenue guidance given by Amazon for the fourth quarter of $66.5 billion to $72.5 billion, as analysts had previously expected to see guidance higher than the upper end of this range for the past couple months. The ability of Amazon to continue to grow as fast as expected by the market is hugely important, given the company's current price to earnings multiple of 92 (post-selloff).
That being said, a few bright spots remain for investors in this earnings report. Underpinning the tech giant's results were solid numbers from the company's Web Services division, which posted growth that met investor expectations. This is one of the company's core growth segments over the long-term, and many analysts and investors look closely at this business unit, given the outsized net income driver this division has been, relative to its size, in recent years.
Additionally, the company's advertising business, while small in proportion to the firm's overall revenue, came in higher than anticipated and is expected to be a key growth driver for Amazon moving forward.
This revenue miss and lower than expected forward guidance on revenue could be attributed to the company's sales mix shifting toward more third party sales which bring in less income per transaction than Amazon-fulfilled transactions. I suggest investors dive deeper into the revenue numbers and what drove the revenue miss in this most recent quarter - it may not be as bad as you think.
Invest wisely, my friends.
