'The recession may be here already': Amazon sees $120 billion in market value wiped out after mixed 3rd-quarter earnings, but Wall Street isn't turning bearish yet

© PATRICK T. FALLON/AFP via Getty Images ‘The recession may be here already’: Amazon sees $120 billion in market value wiped out after mixed 3rd-quarter earnings, but Wall Street isn’t turning bearish yet

  • Amazon plunged 13% on Friday after its third-quarter earnings results disappointed investors.
  • But Wall Street is defending the e-commerce giant and calling the stock decline a buying opportunity.
  • “We believe the pressures on Amazon’s business are largely macro-driven, and not fundamental,” JPMorgan said.

Amazon’s mixed third-quarter earnings results and weak fourth-quarter outlook wiped out $120 billion in market value on Friday, as the stock fell about 13%. The stock briefly dropped out of the $1 trillion market value club at its lows of the day.

But Wall Street is largely defending the e-commerce giant, calling Friday’s decline a buying opportunity as they pin much of the weakness in Amazon’s results and guidance on a weaker macroeconomic backdrop.

Here were the key numbers:

Revenue: $127.1 billion, versus analyst estimates of $127.6 billion

Earnings per share: $0.28, versus analyst estimates of $0.22

Q4 Revenue guidance: $140 billion to $148 billion, versus analyst estimates of $155.5 billion

While much of Wall Street reduced its price targets on Amazon due to the earnings results, they largely stuck with the company, arguing that it still is well positioned to take market share from competitors in both its cloud and e-commerce segments.

Here’s how Wall Street is reacting to Amazon’s third-quarter numbers.

Bank of America: “Outlook suggests recession has already arrived.”

Price Target: $137 from $150, reiterates “Buy.”

“The holiday revenue outlook was surprisingly weak, limiting margin expansion, but this outlook follows a 3Q in which Amazon gained significant share, and we expect continued share gains in 4Q,” BofA said.

“As for future margin leverage, Amazon has slowed shipping cost per unit & capex spend to flattish y/y, while 3Q headcount growth was just 5%, and we see the company poised to show material margin improvement when macro conditions improve. We still see $69bn of future profit potential from AWS, advertising and 3rd-Party services (based on 2023 revenues) that Amazon can unlock over the next 3 years,” BofA said.

Goldman Sachs: “We see Amazon as well positioned for future outperformance.”

Price Target: $165 from $175, reiterates “Buy.”

“We reiterate our view that Amazon will compound a mix of solid revenue trajectory with expanding margins as they deliver yield/returns on multiple year investment cycles,” Goldman said.

“After trading in a range (& underperforming the broader market) for most of the past 2-3 years, we see AMZN as well positioned for future outperformance as eCommerce margins normalize (even if just back to 2018/2019 levels), as its advertising business continues to achieve scale and as AWS can still benefit from a long-tailed structural growth opportunity in the shifting needs of enterprise customers (while producing a balance of growth and margins),” Goldman said.

JPMorgan: “Not thesis changing” and “buying dip.”

Price Target: $145 from $175, reiterates “Overweight.”

“We believe the pressures on AMZN’s business are largely macro-driven, and not fundamental. And as we’ve already seen w/rationalization of the fulfillment network & headcount, AMZN is balancing its investments between the near-term macro environment & long-term strategic opportunities,” JPMorgan said.

“We continue to believe that AMZN is on track to improve profits in 2023, w/FCF inflecting, albeit at lower levels than previously expected. Accordingly, while the degree of macro impact going forward is unclear, we do not believe the current pressures are thesis-changing,” JPMorgan said.

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