Amazon stock hit hardest after tech earnings bonanza, despite misses by Apple and Alphabet

Technology

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Andrew Ross Sorkin speaks with Amazon CEO Andy Jassy during the New York Times DealBook Summit in the Appel Room at the Jazz At Lincoln Center on November 30, 2022 in New York City.
Michael M. Santiago | Getty Images

Shares of Amazon fell as much as 6% on Friday, a day after the e-retailer posted soft growth in its retail and cloud computing businesses and gave downbeat guidance.

Its stock was hit harder than peers Apple and Alphabet, which also reported on Thursday evening. Shares of Apple were trading up about 2% on Friday, while Alphabet was down about 2%. Both of those companies missed on the top and bottom lines.

Amazon’s fourth-quarter revenue increased 9% to $149.2 billion, topping analysts’ expected $145.4 billion. But the revenue beat was overshadowed by another quarter of slowing growth in Amazon’s core retail business and in Amazon Web Services, which have been dented by the challenging economic environment.

Amazon said it expects revenue of between $121 billion and $126 billion in the current quarter. Analysts had been expecting $125 billion.

“Consumers sound cautious and the Cloud deceleration cadence appears to be landing in the ‘mid-teens’ for [the first quarter],” analysts at Piper Sandler, which have an overweight rating on Amazon shares, wrote in a note Friday.

“Above all, management comments suggest AMZN is still navigating a difficult stretch,” the analysts added.

Despite the near-term rockiness, several analysts said they remain encouraged by CEO Andy Jassy’s efforts to control costs. They also believe Amazon will prove it can withstand the economic turbulence and can continue to grow in the long term.

Jassy has been working to get Amazon’s costs under control after a period of unbridled expansion. Last month, the company said it would lay off more than 18,000 corporate employees. It enacted a hiring freeze among its corporate ranks, cut some projects, closed some physical stores and paused warehouse expansion.

“While the next few quarters will likely remain volatile as an output of macroeconomic volatility, the long-term narratives from Amazon and a compelling multi-year risk/reward should appeal to investors,” Goldman Sachs’ Eric Sheridan wrote in a note Friday.

Analyst sentiment was a bit different for Apple, which telegraphed that things are getting better. That may explain why its stock is in the green. “Taking a step back, it’s rare to see Apple miss and guide down in a quarter, but we believe the long-term positives from tonight’s report outweigh the short-term negatives,” Morgan Stanley’s Erik Woodring wrote.

Similarly, despite Alphabet’s misses, analysts are bullish on its prospects for artificial intelligence and highlighted its strong core business. “We see Alphabet as a more defensive stock in the group in 2023 with more relative earnings stability given utility of search, expense flexibility, healthy margins that will minimize cash flow concerns, and opportunity to support the stock with buybacks,” Bank of America’s Justin Post said.

WATCH: Arete Research’s Richard Kramer on the outlook for Apple, Amazon and Alphabet

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