Why Did Amazon Underperform SPY in September?


Oct. 1 2019, Updated 12:00 p.m. ET

Amazon (AMZN) stock fell 2.3% in September. In contrast, the S&P 500 Index (SPY) rose by about 1.5%. While a series of bad news hit the company, trade talks between the US and China and the Fed rate cut supported the equity market.

Antitrust investigations impacted Amazon stock. Plus, media reports blamed the company for tampering with search results.

However, some positive announcements prevented a freefall in the stock. The company launched the new Fire TV Cube and Fire TV editions in September. Also, frequent news about Amazon’s ongoing Great Indian Festival supported the stock. The company’s stance on climate change and order for 100,000 electric trucks from Rivian helped the stock. The company also acquired INLT—a cloud-based startup firm.

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Peers’ performance

The stock fell in September. However, the company’s peers put up a mixed show. Facebook (FB), Twitter (TWTR), Netflix (NFLX), and Disney (DIS) fell 4.1%, 3.4%, 8.9%, and 5.1% in September. However, Apple (AAPL), Alphabet (GOOGL), and Microsoft (MSFT) rose 7.3%, 2.6%, and 0.8%, respectively.

The tech sector is gearing up for the upcoming earnings season. Analysts expect Facebook, Microsoft, and Netflix’s earnings to rise 8%, 9%, and 17% YoY (year-over-year) in their upcoming quarterly results. However, analysts expect Amazon, Apple, Google, Twitter, and Disney’s earnings to fall.

Analysts expect Apple, Google, and Twitter’s earnings to fall marginally by 3%, 5%, and 3% YoY. However, they expect Amazon and Disney’s earnings to fall sharply by 21% and 34% YoY in their upcoming earnings.

Amazon’s lower earnings estimates are due to its rising transport costs led by the expanding one-day delivery network. So, the expectation of weaker profits could have also impacted the stock.

Antitrust investigation impacted Amazon

The FTC is probing Amazon over antitrust issues, according to media reports. FTC officials are speaking to small sellers to figure out their revenue model. The FTC is investigating whether the company dampened market competition. To learn more, read Amazon Stock Is Down on FTC Probe.

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Allegations of rigging search results

According to media reports, the company tampered its search algorithm to rank more profitable products higher. The company changed the product aspects criteria to show its private-label products on top. So, Amazon indirectly influenced its search methodology. However, the company denied any such tampering. The stock took a beating on the day of the news release.

Positive news supported Amazon stock

Amazon’s new product launches, climate change initiatives, ongoing Great Indian Festival, and acquisition of INLT partly supported the stock in September.

Amazon has gone big on streaming devices with the launch of the new Fire TV Cube and 15 New Fire TV editions. The launches will expand the company’s product portfolio and help reach more customers.

News about Amazon’s Great Indian Festival supported the stock. The festival aims to tap the surging Diwali sales in India. The company acquired INLT, a licensed customs broker that provides a cloud computing platform for sellers to import goods in the US. The INLT acquisition is good news for Amazon sellers.

Amazon has ordered around 100,000 electric delivery trucks from Rivian. The vans will start delivering the company’s packages as early as 2021. The company plans to reduce its carbon footprints with this order. By 2030, Amazon’s full fleet of EV trucks will be on the road. The company should save about 4 million metric tons of carbon per year.

However, Ford’s (F) former CEO had a divergent view on Amazon’s electric truck order. To learn more, read Ford’s Former CEO Finds Amazon’s Rivian Deal Risky.


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