Should Investors Get Out of Amazon Stock During the Nasdaq Tech Selloff?

E-commerce stocks aren’t getting much love these days. of ProShares Online Retail ETF It is down 59% from the high set in February 2021. E-commerce giant Amazon (AMZN -1.24%) It did slightly better but still saw the stock price drop into correction territory. The tech giant’s stock is down 24.5% from its peak last summer. Compare that to a tech-specific 20.3% discount Nasdaq-100And investors are especially wary of technology growth stocks and the e-commerce sector.

After the boom in e-commerce at the start of the pandemic, the reopening economy has drawn more shoppers back to brick-and-mortar stores, putting pressure on online shopping platforms. And while Amazon has improved its business over the years through categories like Amazon Web Services (AWS), Amazon Prime and digital advertising, the company’s bottom line is still dominated by online retail.

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Amazon reported its second-quarter earnings on July 28, giving investors an update on the direction of the business during this volatile period. Let’s review the current state of the tech behemoth and see if Amazon stock is a smart investment today.

How does it go for an e-commerce leader?

In the latest quarter, Amazon’s top-line total sales rose 7.2 percent year over year to a total of $121.2 billion. On the bottom line, Amazon reported a loss of $0.20 per share for the second consecutive quarter in the red. As seen in other e-commerce companies these days, the main cause of losses is the ongoing macro headwinds, including high inflation in fuel, energy and transportation costs.

Q2 sales from Amazon’s e-commerce division fell 4.3% year over year to $50.9 billion. E-commerce sales accounted for 42% of total sales in the quarter. The decline can be partly attributed to a strong contrast to the strong Q2 in 2021. However, growth has been uneven for the e-commerce leader, and Amazon needs an improvement in the economic environment to restore growth rates. Five year rules.

Closely watched Amazon Web Services cloud platform sales grew 33.3 percent to $19.7 billion, while its subscription services and advertising services categories grew 10.1 percent and 17.5 percent, to $8.7 billion and $8.8 billion, respectively. It was heartening to see his advertising division doing so well, given the likes of ad-driven tech companies. Snap And Meta forums They have struggled of late.

For the full fiscal year, Wall Street analysts expect the company’s total revenue to grow 10.6% year-over-year to $519.5 billion and earnings per share to decline a whopping 80.9% to $0.62. By fiscal 2023, when year-over-year comparable metrics come back down to earth, analysts forecast bottom-line growth of 15.8% and 303.2%, respectively.

Amazon’s management was reluctant to update full-year guidance in this latest report, but did discuss its expectations for the third quarter. Management said that net sales in Q3 will increase to a midpoint of $127.5 billion for a total of $127.5 billion and will grow 15% compared to Q3 2021. The guidance was tempered by unfavorable foreign exchange risk. Operating income is positive and expected to reach $1.75 billion at the midpoint, compared to $4.9 billion in Q3 2021. This policy does not apply to business acquisitions, restructurings or legal settlements, including the recent purchase of a Roomba robot vacuum cleaner. Robot Approximately $1.7 billion.

What should investors do?

For investors with an extended time horizon, Amazon stock remains an unsafe long-term bet. When the market falls in love with a best-in-class stock, smart investors should interpret that as a clear buying opportunity. That’s what we’ve been seeing unfold at Amazon over the past few months — the e-commerce company has faced several headwinds, all of which have been primarily short-term. Hence, long-term investors can profit from this current sell-off by stocking up on the e-commerce leader’s shares today.