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Amazon.com shares (AMZN.O) fell to a four-year low on Friday, after expected sales for the holiday season were overtaken, highlighting concerns that techies Wall Street are finally starting to face tougher competition.
The third quarter results marked the second time since Billionaire Jeff Bezos' group failed to meet its sales targets and, along with the same disappointment from Google's owner, Alphabet (GOOGL.O), sent a shockwave on the stock markets.
Wall Street analysts have not lowered ratings and have almost unanimously supported the companies' long-term outlook. Several of them, however, indicated that they appeared to have begun to face stiffer competition from their tech peers and retail companies that Amazon had recently intimidated. years.
The nearly 9% drop in equities caused Amazon's market value to lose more than $ 80 billion and relegated it to Microsoft Corp (MSFT.O) and Apple Inc. (AAPL.O) in terms of market value.
Now that the Seattle-based company has devoured retail players such as Borders, Sears and Toys "R" Us, it faces greater challenges from multinationals investing heavily in competition. DA Thomas Forte, Analyst at Davidson & Co.
"Google, Microsoft and Walmart … are more difficult to kill," he said.
Alphabet's shares fell about 2% after a decline in sales after exceeding estimates for the last eight quarters.
Revenue from Amazon's international operations, which accounted for 27.5% of total sales, was at the heart of the earnings deficit, with growth halved to 13.4% from the previous quarter.
"We do not see any real structural problems with Amazon, but almost every sector of the business is slowing down somewhat and we are generally seeing another deceleration in retail sales at 4T, so we are struggling to identify a catalyst," said Ross Sandler, Barclays analyst.
Scott Mushkin, an analyst at Wolfe Research, said there are two possible reasons Amazon predicted a weaker Christmas shopping district than predicted by Wall Street.
"They are worried about the macro. The second thing is that they are concerned about competition, "he said, pointing out that the two signs of a slowing economy were present and that big retailers were aggressively pursuing strategies to compete with Amazon for the holiday sale.
Amazon expects sales to reach $ 72.5 billion in the Christmas quarter before Christmas, while analysts expected an average of $ 73.9 billion, according to Refinitiv data.
Its expected operating profit of $ 2.1 billion to $ 3.6 billion was also lower than consensus estimates.
Several analysts have described the company's outlook as "conservative" and said that a possible decline in profits seemed highly unlikely.
"Overall, Amazon's growth trajectory remains strong, including advertising, groceries, pharmacy and retail, as well as Amazon Business ($ 10 billion in sales in eight countries). Amazon Web Services, "said analysts at the Telsey Advisory Group.
Amazon, Alphabet and Microsoft have all continued their growth in cloud services, but with signs of deceleration.
In the latest quarterly reports, Microsoft's cloud computing business, Azure, reported revenue growth of 76 percent, down from 89 percent in the previous quarter. Google's other revenue, including its cloud business, grew 29%, 4% below analysts' estimates at Cowen & Co. Amazon's Cloud business revenue grew 46 percent. $ 6.68 billion, compared to about $ 6.67 billion previously.
"In general, cloud activity will continue to grow, but not at the same pace, and it is an indication of market maturity," said Sid Nag, senior director of cloud technologies and services at Gartner Research.
Shares of the company fell by 7.2% to $ 1,654 during trading at noon.
Reuters
Report by Supantha Mukherjee, Sonam Rai and Jasmine I S at Bengaluru and Jane Lee in Oakland, California; edited by Peter Henderson, Patrick Graham and Bill Trott
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