Amazon (AMZN) Plunges After Missing Sales and Guidance Expectations, Analysts Slash PTs to Reflect Weaker Guidance

July 30, 2021 6:55 AM EDT
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Shares of Amazon (NASDAQ: AMZN) are down more than 6% in pre-open Friday after the e-commerce giant missed analysts’ estimates for Q2 sales and guidance.

Revenue came in at $113.08 billion to miss on the $115.2 billion expected from market analysts. On a more positive note, earnings per share were reported at $15.12 to easily top the Street’s consensus of $12.30.

“Over the past 18 months, our consumer business has been called on to deliver an unprecedented number of items, including PPE, food, and other products that helped communities around the world cope with the difficult circumstances of the pandemic. At the same time, AWS has helped so many businesses and governments maintain business continuity, and we’ve seen AWS growth reaccelerate as more companies bring forward plans to transform their businesses and move to the cloud,” said Andy Jassy, Amazon CEO.

Amazon’s cloud segment AWS saw its sales accelerate in Q2 to 42% from 37% in the prior quarter. However, overall sales rose 27% to mark a significant slowdown compared to 41% YoY.

“We’re starting to lap that and that’s why you see some of the growth rate coming down,” CFO Olsavsky commented during the earnings call.

Amazon also missed on analysts’ estimates as it expects sales to come between $106 billion and $112 billion, projecting a growth of 10% to 16%. The guidance missed on the analysts’ estimates of $119.2 billion.

“Our customers are safe and healthy and ordering from us. And we know that there’ll be more vacations or be more mobility. They’ll be things that probably people shied away from last year and that’s all good,” Olsavsky said on the call with reporters. “But it does tend to lead them to do other things besides shop. So we’re just adjusting our run rates in the period that we see that happening,” Olsavsky added.

The company has also continued to add workforce, employing 1.33 million people globally in Q2, which is up 52% YoY.

Susquehanna analyst Shyam Patil slashed his price target from $5,500.00 per share to $5,500 to reflect readjusted expectations for reopenings. He remains Positive-rated on AMZN as the business is still very strong despite the slowdown.

“Reopenings have shifted consumer shopping habits more toward offline, leading to a readjustment of expectation, which we view as something that was bound to happen given the massive spike in eCommerce throughout the pandemic. Looking at the two-year compounded annual growth rates, trends are still very strong and we see no reason to be concerned. Ultimately, we continue to see AMZN as a long-term secular grower underpinned by its strong eCommerce, cloud, and advertising businesses,” Patil wrote in a note.

Mizuho’s James Lee says the Q2 comps proved to be tougher-than-expected, forcing him to cut the PT to $4,100.00 from $4,400.00.

“Revenues and guidance were lower than anticipated despite delivering strong results in advertising and Cloud. Excluding Prime Day, Amazon has been tracking revenue growth of mid-teens since mid-May, and as a result, revenue growth guidance came in 10 points below consensus. OPI guidance at the high end was light by $1.7bn, including $1bn COVID expenses. With expectations being reset, we are lowering FY23 EBITDA by 6% to $130bn and PT from $4,400 to $4,100, but we feel 3Q21 revenue guidance could be conservative due to the return of back-to-school. We remain positive on AMZN long-term, and believe its valuation is attractive at 13x FY23 EBITDA compared to 30% CAGR,” Lee said in a note sent to clients.

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