Amazon’s (NASDAQ:AMZN) third-quarter performance was far from stellar. The e-commerce giant reported Q3 earnings per share (EPS) of $4.23, which was significantly lower than Wall Street estimates of $4.62 per share. Meanwhile, reported revenue of $70 billion was up 24% year-over-year. This topped analyst expectations of $68.8 billion.
Amazon shares dumped by as much as 9% in after-hours trading after the release of the earnings report. Investors appear to have looked at three key areas that led them to believe that the stock is likely headed lower.
First,the EPS of $4.23 is down by over 26% from last year’s EPS of $5.75. This is the first time Amazon’s EPS declined on a year-over-year basis in two years.
Second, revenue of Amazon Web Services jumped by 35% compared to the same quarter last year to the tune of $9 billion. However, the segment’s growth rate is in a downtrend. The business unit printed gains of 37%, 42% and 46% in the second-quarter, first-quarter and fourth-quarter of last year, respectively.
Lastly, the Seattle-based company gave lower than expected guidance for the final quarter of this year. Amazon reported Q4 revenue guidance between $80 billion and $86.5 billion. Those figures are significantly lower than Wall Street’s expectations of $87.4 billion.
In spite of underwhelming results and forecasts, Amazon remains the favorite S&P 500 stock on Wall Street.
The fourth largest company in the world gets the highest buy rating on the Street, according to CNBC. To arrive at this conclusion, CNBC relied on FactSet data to filter all S&P 500 firms. The media outlet then computed for the percentage of buy ratings or overweight ratings in comparison to total ratings. CNBC eliminated stocks that were covered by less than ten analysts.
Results revealed that Amazon is the most beloved stock on Wall Street with an impressive 97.9% buy rating. Forty-seven out of the 48 analysts that covered Amazon gave the stock a buy or overweight evaluation. It was followed by Marathon Petroleum Corp. (MPC). It got 17 buy ratings out of 18 analysts that reviewed the stock.
Good for a podium finish is L3 Harris Technologies (LHX). Fifteen out of the 16 analysts that covered LHX gave the stock a buy rating. Other companies that made the list include Thermo Fisher Scientific (TMO), Salesforce.com (CRM), Pioneer Natural Resources (PXD), Mastercard (MA) and Visa (V).
From a technical perspective, AMZN is not looking great. Bulls lost the 200-day moving average. On top of that, they squandered the chance to stay above the key price area of $1,800.
Nevertheless, Mati Greenspan, senior market analyst at eToro, believes that the selloff will soon be over. He told CCN,
Once again, Amazon took a hit on their earnings announcement due to significant investment in research and development.
The trader added,
Jeff Bezos has a long-standing history of reinvesting all profits gained. A strategy that most Wall Street investors don’t like but has certainly paid off in the long run.
When asked if he sees Amazon eventually recovering its bullish tone, the analyst replied,
As long as the economy remains strong, I don’t see any reason for it to fail.
There’s a reason why Wall Street loves Amazon. Jeff Bezos plays the long game.
Disclaimer: The above should not be considered trading advice from CCN. The writer does not own Amazon (AMZN) stock.
This article was edited by Sam Bourgi.
Last modified: November 11, 2019 14:49 UTC