Amazon Drops 50%

By Douglas A. McIntyre Updated Jan 1, 11:26AM EST · Published Jan 1, 9:24AM EST

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Amazon Drops 50% — © jetcityimage / iStock Editorial via Getty Images

Amazon shares have fallen by half in the last year. This compares to a 33% drop in the Nasdaq. While its cloud business remains the largest and most profitable in the US, its e-commerce operations are in shambles. The stock’s short-term direction will be determined by how well Amazon.com did over the holiday season, which is the time when this part of Amazon has the most revenue.
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Amazon Web Services (AWS) had revenue of $20.6 billion in the third quarter and an operating income of $5.4 billion. That puts it well ahead of rivals Microsoft, Google, Saleforce.com, and Oracle. The number of corporations that will move to the cloud will continue. Data that is stored in the cloud is more secure. Cloud storage operations like AWS are usually less expensive than when companies create small “clouds” for their storage operations.

Amazon’s e-commerce business underperformed last quarter. In North America, it lost $412 million on revenue of $78.8 billion. Its international e-commerce business lost $2.5 billion on $27.7 billion.

Amazon expects fourth-quarter revenue growth of as little as 2% year over year. It may post no operating income. Its management blamed …COVID-19 pandemic, fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions and customer demand…” However, the real villain is expenses. New CEO Andy Jassy’s ability to keep costs down has been wanting. He should reasonably feel that his job is on the line.

Amazon aggressively expanded during the worst of the pandemic, as people had more and more of the goods they used delivered instead of bought in stores. As that trend has dropped, Amazon’s cost base has fallen less quickly. The result is a drop in margins.

Amazon Prime Video also faces hard challenges. It was arguably the largest streaming service along with Netflix. Aggressive challenges from Disney, the former Warner properties, and Apple have made the likelihood it can hold its position and profitability less certain.
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Amazon’s stock may recover some if it has strong holiday sales, but it won’t double back to previous highs.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.