Why Amazon Stock Tanked in August

Amazon (AMZN) stock fell 5.2% in August. Lower-than-expected earnings, political criticism, and macro uncertainties affected its stock.

Maitali Ramkumar - Author

Sep. 3 2019, Published 12:22 p.m. ET

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Amazon (AMZN) stock fell 5.2% in August. Lower-than-expected earnings, political criticism, and macro uncertainties affected its stock. Kurt Zumwalt also left the company, according to media reports.

The fall in Amazon stock was partly offset by the news of its deal with Future Coupons and the inauguration of its biggest office in India. Plus, the company’s strengthening position in the renewable energy industry helped its stock.

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Amazon stock impacted by earnings miss

Amazon’s EPS of $5.22 missed analysts’ estimate of $5.57 by about 6% in the second quarter. Its lower-than-expected earnings affected its stock. Amazon also lowered its earnings guidance for the next quarter, which further affected its stock. The company built the higher cost of transporting inventory into its earnings estimate.

Amazon expects its earnings to fall from $3.7 billion in the third quarter of 2018 to $2.1 billion–$3.1 billion in the third quarter of 2019. However, its operating income rose 3% to $3.1 billion in the second quarter. To learn more, read Why Amazon Stock Slumped on Its Q2 Results?

Facebook (FB), Netflix (NFLX), and Disney (DIS) have fallen 0.3%, 5.9%, and 3.2%, respectively, in August. Facebook’s EPS of $1.99 surpassed analysts’ estimate of $1.88 in the second quarter. But Netflix stock took a beating after it missed its subscriber growth forecast.

However, Apple (AAPL), Alphabet (GOOGL), and Twitter (TWTR) rose 5.5%, 1.5%, and 1.6%, respectively. In the second quarter, Alphabet’s EPS of $14.2 beat analysts’ mean estimate of $11.3. In the same quarter, Twitter’s revenue of $841 million surpassed analysts’ estimate by 1%. Apple’s third-quarter EPS of $2.18 exceeded analysts’ estimate of $2.10.

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Amazon stock: Politicians’ soft target

The political landscape in the US is gearing up as the 2020 election approaches. Some US politicians may be targeting tech companies to promote their political ideologies. Presidential candidates Senator Bernie Sanders and Senator Elizabeth Warren, along with President Donald Trump, have criticized Amazon about a number of issues. These include taxes, wages, post office losses, and the Washington Post’s coverage.

Politicians’ views have often affected Amazon stock. In August, Sanders took on Amazon for the Washington Post’s coverage. President Trump also criticized the Post. He attacked Amazon around four times in a single week, affecting its stock. Plus, Warren wants to break up big tech companies. To learn more, read Are Politicians Targeting Amazon Stock?

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Zumwalt exits Amazon

According to media reports, Kurt Zumwalt, Amazon’s top treasurer, has left the company. Zumwalt has been part of the company’s fantastic growth in the past 15 years. Under his leadership, the company has continued to expand seamlessly.

Though Zumwalt’s exit might not have directly affected Amazon stock, it could affect the company’s growth engine. In the past decade, Amazon has ventured into many high-growth business segments via a series of acquisitions. To learn more, read Zumwalt Leaves Amazon: What It Means for Investors.

Amazon strengthens its foothold in India

Amazon has strengthened its foothold in India by opening its biggest office in Hyderabad. It’s also entered into a deal with Future Coupons, which provides it with an indirect stake in Future Retail. The deal also gives Amazon the option to buy more stake in Future Retail. Both events indicate Amazon’s focus on strengthening its position in India. It’s ventured not only into the e-commerce space in India but also into the retail, online food delivery, and travel spaces. Its stock has seen a boost on its strengthening position in India.

Amazon’s renewable energy position

Amazon has incurred capex in its second wind farm in the Republic of Ireland. The company has also invested in its seventh solar farm in the Commonwealth of Virginia. It now has 66 renewable energy projects worldwide. These projects could produce 3.9 million megawatt hours of clean energy per year. To learn more, read Amazon’s Renewable Energy Portfolio Is Strengthening.


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