Amazon's Earnings: Don't Look Back Now
Shares of Amazon took a big hit on Friday as investors signaled their orientation to earnings: Forward.
Shares of the eCommerce and cloud colossus fell 5.4% on the day, reverting to the level nearly $400 below its all-time high, as the weakened guidance into the year overshadowed a strong beat on top and bottom line analyst expectations.
The company's increased spending ambitions on automation, infrastructure, and warehouses will pose problems to the proposed profitability of the company in the view of many.
That concern is increased as the company confronts issues with macro headwinds with the U.S. dollar and regulation in India as well as weaker than anticipated sales from physical stores like Whole Foods.
"Our initial view on the 1Q19 sales guidance is that it is a reflection of unfavorable FX rates and uncertainty regarding the short-term impact on its e-commerce sales for India following changes in regulation," D.A.
Davidson analyst Tom Forte said on Friday, highlighting two of the major issues.
However, he remained confident in the company's ability to grow substantially due to its well built foundation in ecommerce and cloud.
"Historically, investors were well served to increase their purchase of shares when short-term investment cycles led to pullbacks in its share price," Forte commented.
What Does it Mean for the Rest of Earnings?
The key takeaway for just about any stock is that the 2019 guidance is what matters.
In fact it seems to be the only thing that matters.
Boeing for example had extremely strong guidance into the year that convinced investors to book a ticket.
Caterpillar meanwhile was dumped in droves after it suggested a slowdown in profits was ahead.
In short, after a year of worry about slowdown or looming recession, if the CEO of one of your holdings starts talking about a slowdown or tempers guidance in any way, don't be surprised to see the market react swiftly.
It's an unforgiving market at the moment.