Amazon stock plunges 14% in biggest one-day drop since 2006

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Even mega-cap tech giant Amazon couldn’t bear up against the macroeconomic headwinds that imperiled Corporate America last quarter.

Shares of Amazon (AMZN) plunged 14% on Friday, marking the retail behemoth’s biggest intraday drop since July 2006, according to Bloomberg data.

The sell-off comes at the heels of a disappointing earnings report from Amazon that showed a loss of nearly $4 billion in the three months ended March 31 — the company’s first quarterly loss in seven years — attributed largely to its investment in electric-vehicle maker Rivian Automotive (RIVN), which has seen its stock shed more than 75% since going public late last year.

During the same quarter last year, Amazon posted a profit of $8.1 billion as its core retail business benefited from a pandemic-related surge in online shopping.

On the revenue side, Amazon’s net sales logged the slowest pace of growth in about two decades, up 7% to $116.4 billion, compared with a pace of 44% in the same period last year.

“Amazon is still a titan, no one can deny that – $116bn of quarterly sales takes a mighty beast,” Hargreaves Lansdown Lead Equity Analyst Sophie Lund-Yates said in an emailed note. “Sadly though, the market isn’t asleep to the fact that Amazon is suffering badly at the hands of economies of scale.”

Even more concerning for investors was a disappointing outlook for the current quarter that missed analyst estimates. Amazon projected second quarter revenue between $116 billion and $121 billion for the period ending June 30, citing higher transportation expenses associated with persisting supply chain and inflationary pressures and increased labor costs from growing staff to meet higher pandemic demand. Bloomberg analysts were looking for net sales of $125.01 billion, according to consensus data.

The company also warned revenue growth could further wane next quarter to a rate of between 3% and 7%.

“The pandemic and subsequent war in Ukraine have brought unusual growth and challenges,” Amazon CEO Andy Jassy said in a statement. “Today, as we’re no longer chasing physical or staffing capacity, our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network.”

A fast-moving conveyor moves a package through a scanning machine on its way to a delivery truck during operations on Cyber Monday at Amazon's fulfillment center in Robbinsville, New Jersey, U.S., November 29, 2021. REUTERS/Mike Segar     TPX IMAGES OF THE DAY

A fast-moving conveyor moves a package through a scanning machine on its way to a delivery truck during operations on Cyber Monday at Amazon’s fulfillment center in Robbinsville, New Jersey, U.S., November 29, 2021. REUTERS/Mike Segar TPX IMAGES OF THE DAY

Despite a challenging quarter, analysts remain bullish about Amazon’s room for recovery.

“There were a lot of downsides but there were bright spots during the quarter,” Cowen Senior Analyst John Blackledge told Yahoo Finance Live on Friday, citing a pick-up in delivery times, easing compensations, and the end of a challenging part of the investment cycle.

Analysts at Bank of America also pointed out that spot freight costs are already coming down, which should help with some of the costs of inflation Amazon called out, and employee staffing levels can be addressed with attrition and limited hiring in the second half of the quarter. Also expected to serve as a tailwind will be the recent 5% fuel and inflation surcharge Amazon recently announced, and the likelihood for the retail industry to raise prices to reflect higher costs over time, per BofA.

While overshadowed by the disappointing results, sales for the company’s high-margin cloud computing business AWS continue to be an area of optimism. Sales from AWS increased 36.7% year-over-year to $18.44 billion, the company said on Wednesday.

“Amazon is well equipped to withstand cost pressure with greater efficiencies than most if its peers (and a large AWS profit pool), and the retail industry will eventually pass through higher costs to consumers,” BofA said in a note Friday.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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