Amazon.com, Inc. (NASDAQ:AMZN) shares plunged 7.45% to a 52-week low of $289.85 in early trading Friday after the company reported disappointing third-quarter results. It’s the lowest level since $280.98 on August 30, 2013. The decline wiped out more than $10 billion from the company’s market value. The online retailer also issued weak guidance for the crucial holiday quarter sales, adding to investors’ worries.
Investors’ honeymoon with Amazon over?
During the first half of this year, the e-commerce giant spent heavily on developing grocery deliveries, mobile phones and Hollywood-style production. Investors were expecting to see some sustainable results in the later half of the year. However, Amazon missed Wall Street forecasts on almost every parameter. The company reported net sales of $20.58 billion, compared to the consensus estimate of $20.84 billion. The company said its sales in Japan failed to recover in Q3 after steep decline in the second-quarter.
The online retailer’s Q3 losses widened from $41 million or 9 cents last year to $437 million or 95 cents in the latest quarter. Analysts were projecting a loss of 74 cents per share. Amazon’s North America revenue jumped 25% to $12.87 billion, but fell short of the consensus estimate of $12.9 billion. International sales rose 14% to $7.7 billion, missing analysts’ expectations of $8 billion. Gross margins for the quarter came in at 28.9%, again missing the consensus estimate of 29.3%.
Amazon’s Q4 guidance implies further deceleration
UBS analyst Eric J. Sheridan said in a research note that weak guidance for the current quarter, which implies further deceleration, will hurt the stock. UBS has a Neutral rating on the stock with $360 price objective. Amazon forecasts Q4 revenue of $27.3 billion to $30.3 billion. It equates to 7%-18% growth from the same quarter a year ago. In contrast, analysts expect Q4 revenue of $30.98 billion.
That’s a disappointing revenue growth forecast for the busiest shopping period of the year. Historically, Amazon’s Q4 revenues have grown over 20% for the past several years. Amazon chief financial officer Tom Szkutak said at the earnings call that forex headwinds reduced the company’s Q4 revenue forecast by 2.5%. The company expects its operating income to be between a loss of $570 million to a gain of $430 million.