Amazon Looks to Recover After a Devastating 2022. (AMZN) confronts a slew of obstacles as it attempts to reclaim its mojo and return to robust growth and long-term profitability. The destiny of Amazon stock, as well as its various companies such as cloud computing, is in jeopardy.

Amazon shares have been struggling since late 2021, when the e-commerce behemoth’s pandemic-fueled growth boom came to an end. The company’s problems raise the issue of whether Amazon, long seen as a Wall Street behemoth, can recover.

Amazon’s second-quarter financial report, released late Thursday, showed signs of recovery, but the company is still in the jungle. The Seattle-based corporation reported higher-than-expected revenues and profitability, as well as the stabilization of its cloud-computing business. It also provided a third-quarter prediction that was stronger above Wall Street’s expectations.

Amazon increased the size of its warehouse network in only 24 months during the epidemic before deciding it needed to rethink its operations. The corporation was compelled to scale down its ambitious warehouse expansion ambitions, as well as rethink its expenditure on various business risks that had yet to pay off.

Meanwhile, growth in its Amazon Web Services (AWS) cloud computing division has slowed significantly. AWS has been seen as a significant growth engine for Amazon, assisting in driving results to stratospheric heights, but sales are falling.

As a consequence, Amazon reported a deficit in fiscal 2022, its first since 2014, as online sales declined and expenditures rose. Furthermore, Amazon stock has lagged behind its Big Tech counterparts this year as it attempts to revive growth and improve profitability.

“Amazon has gone through a massive de-rating,” Evercore ISI analyst Mark Mahaney told Investor’s Business Daily. The stock’s “multiple has come down a lot over the last couple of years.”
Amazon’s stock is down 29% from its peak.

Amazon stock reached a split-adjusted high of 188.65 in July 2021 before undergoing a 20-for-1 split in June 2022. Amazon shares closed at 133.68 in July 2023, down 29% from their all-time high.

According to Mahaney, Amazon’s multiple has dropped from nearly 20 times enterprise value to adjusted profits to around 11 times that measure.

Amazon’s other classmates in the once-dominant “FANG” group of stocks have also been impacted by the post-Covid decline. However, two of them are healing at a quicker rate.

After a series of strategic moves, Facebook parent Meta (META) is down just 16% from its September 2021 peak. Alphabet (GOOGL), Alphabet’s parent company, is presently trading around 12% below its February 2022 high. Netflix (NFLX) has, on the other hand, dropped more than 37% from its peak in November 2021.

Leave a Reply