Amazon Stock Plummets As Company Reports Nearly $4 Billion Loss


Amazon Stock Plummets As Company Reports Nearly $4 Billion Loss

Amazon Stock Plummets As Company Reports Nearly $4 Billion Loss

Amazon stock plunged 10% Thursday after the online retailer announced its second quarterly loss in three years. The company reported that it lost $437 million, or 40 cents per share, for the quarter ending June 30, compared with $41 million, or four cents per share, a year earlier. Revenue surged 20% to $16 billion from $13 billion last year, but profits fell short of analysts’ expectations as the company spent heavily on infrastructure and original programming and yielded little pricing power amid continued heavy competition from Walmart and Target.

Why did the stock drop?

Amazon has had a lot of success from its $13.7 billion acquisition of Whole Foods Market, Inc. that was completed in August 2017. Amazon also continues to see strong results from its Prime membership program and its web services segment is expected to continue driving revenue growth for Amazon. Overall, Amazon has experienced rapid revenue growth over the past few years and it has been outperforming analysts’ expectations on a quarterly basis; however, these performance metrics do not factor into how investors price stocks. Instead, investors focus on fundamentals such as net income and earnings per share when they determine stock prices.

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What does this mean for us?

Amazon had a tough year in 2018. The company lost nearly $4 billion in stock value, and its market share fell from 33% to 29%. Analysts say that losses are likely to continue for Amazon as it invests in growth and innovation. At first glance, these numbers don’t seem to bode well for e-commerce giant Amazon — but let’s take a closer look at what they mean for your business. First, we have to consider what market share really means.

Will it recover?

Amazon’s stock plummeted by over 5% in after-hours trading on Thursday as investors reacted to an earnings report that featured a nearly $4 billion loss. Investors’ ire was largely directed at CEO Jeff Bezos, who saw his compensation surge from $81,840 in 2015 to a whopping $1.68 million for 2016 despite the fact that Amazon has made no profits since 2010. At one point, Amazon lost money on sales of more than $5 billion each quarter; its losses were so massive and sustained that they wiped out all of its profits from every other business segment combined. In 2015, for example, Amazon’s North American retail division contributed about half of its revenue but also accounted for 85% of its operating income—the only segment that turned a profit.

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Background information

Amazon shares slumped to their lowest level in five months on Thursday, following news that Amazon posted a quarterly loss of nearly $4 billion due to a variety of factors. First-quarter net income fell to $126 million, or 36 cents per share, from $585 million, or a gain of 79 cents per share in last year’s first quarter. Analysts polled by Thomson Reuters had expected Amazon’s earnings at 45 cents per share. The e-commerce giant said its bottom line suffered because it was spending more money than usual on building up its infrastructure and workforce.

Further reading/viewing

It looks like Amazon is going to have another banner year of investing in itself rather than profit. The company said it had a loss of nearly $4 billion in 2015, as costs rose 49% over last year. Its stock plummeted 12% to close at an all-time low of $327 on Friday. In addition to higher spending on technology and other infrastructure investments, Amazon was also affected by foreign exchange rates (exchange rates are changing values between countries). For example, if you’re trading a currency that’s dropping against another (like U.S. dollars), there will be more losses because you need more to buy back that same amount. This can impact businesses selling physical goods overseas.

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