Amazon earned a fortune in the first quarter of 2022. However, investors who have become used to Amazon's rocket-like trajectory during the epidemic have not yet adjusted to the reality that it is no longer accelerating as quickly.
Despite sales of $116.4 billion from January to March of this year — an increase of about 8 billion years over years — Amazon's shares took a plunge in after-hours trading, plunging nearly 10% before settling slightly higher.
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The Main Reason For The Decline
The issue was not that Amazon underperformed in the first quarter, but that Amazon forecasted a slower second quarter than analysts anticipated. According to CNBC, analysts expected Amazon to predict $125.5 billion in revenues, but the business anticipates revenue between $116 billion and $121 billion.
This is not a significant issue in the grand scheme of things, but it demonstrates the communication difficulties that Amazon is now experiencing. The firm saw such tremendous growth in the early phases of the epidemic that investors see its current growth rate as a sign of halting progress.
IN HIS FIRST LETTER TO SHAREHOLDERS, Amazon CEO Andy Jassy attempted to set expectations earlier this month, stating, "In around 15 months, we achieved the equivalent of three years' expected growth."
In The Words of The Experts
Analysts are not incorrect in asserting that Amazon is experiencing a significant slowdown. For Q1 2021, the firm claimed a 44 percent year-over-year increase in net revenues but only a 7% year-over-year increase in Q1 2022. That is far less – according to Compound Capital Advisors, this quarter records Amazon's weakest Q1 growth in history. Amazon also revealed its first quarterly loss since 2015, owing partly to a $7.6 billion loss on its investment in electric car manufacturer Rivian, whose stock has fallen more than 50% this year.
Amazon is now concentrating its efforts on "increasing productivity and cost-efficiency throughout our fulfillment network," according to Jassy. However, he cautions that "this may take some time."
Additionally, the firm stated today that it would celebrate Prime Day in July, after its June date last year. This will boost Amazon's created holiday profits until the third quarter of 2022.
Featured image: Amazon
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