We’re cutting our Amazon price target after a rough quarter. But it isn’t a
Amazon on Thursday evening delivered a rare double miss. Shares of the e-commerce and cloud giant sank in after-hours trading as quarterly revenue and earnings fell short of estimates. Weaker-than-expected retail sales and advertising revenue offset strong Amazon Web Services numbers. Current quarter guidance also missed, though management was probably being conservative there. Revenue increased 12% year over year to $201.9 billion, missing the consensus analyst estimate of $202.3 billion, according to LSEG data. Earnings per share based on generally accepted accounting principles (GAAP) fell 3% year over year to $1.89, missing the consensus estimate of $1.96, according to LSEG. Operating Income of $28 billion beat analyst forecasts by about $1.8 billion, according to FactSet. AMZN YTD mountain Amazon YTD Amazon’s roughly 6.5% post-earnings slide followed up a 4% decline during the regular session. Bottom line At around $228 per share, the Club stock has given back the entire 15% pop it got last quarter , when CEO Andy Jassy explained the line of sight he has on achieving attractive returns on the company’s data center investments. While Jassy’s vision remains clear, the market has become much more skeptical about the returns on each dollar invested in AI infrastructure and how companies will fund these massive spending programs, especially as free cash flow turned negative, as it has for Amazon. Add in the slowdown in Amazon’s core retail businesses — online stores and advertising — and it was a recipe for a disappointing quarter. Still, we see plenty to like about Amazon, including its multiyear AWS growth outlook that could move forward estimates higher, improving margins that allow management to keep reinvesting in the business and make its products and services strong, and likely conservative guidance that will be beat. But a miss is a miss. The long-term drivers keep us positive on the stock as we’re reiterating our buy-equivalent 1 rating. We are, however, trimming our price target to $280 from $300 in recognition of the shifting investor expectations and the stock’s drop from its record closing high of $284 back on Aug. 3. Commentary Revenue growth at cloud unit Amazon Web Services (AWS) accelerated for the sixth straight quarter. At 39.3% year over year, AWS recorded its fastest growth rate in nearly five years. This result was better than what analysts forecasted, but investor expectations may have been for a bigger quarter-over-quarter increase, especially after the strong cloud results from Microsoft and Alphabet on Wednesday night. AWS revenue was $45.98 billion, up from $42.23 billion in the second quarter. One important driver of AWS’ growth was Bedrock, which the company said has become the fastest-growing multibillion-dollar service in the cloud unit’s history. Amazon Bedrock is an AWS service that allows businesses to build and deploy generative AI applications using foundation models from leading AI companies without…
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