It’s ironic the company that pioneered “frustration-free” packaging is drawing the intense frustration of investors.
Following Amazon.com’s (AMZN) jaw-dropping bad third quarter and poor outlook for the fourth, the stock that investors gave a pass to for years is getting trampled. Shares of the online retailer are down $22.26, or 7.1%, to $290.69 Friday. That decline wiped out $10 billion in market value in one day.
Amazon is a prime example of what happens when a stock — that investors had been piling in no matter what — finally loses its momentum and sense of infallibility. Investors, no longer willing to give the stock a pass — can turn fast and harshly reevaluate what a company is really worth. Additionally, when a company gets to the enormous size of an Amazon — keeping growth rates up requires finding huge business opportunities. Apple is increasingly facing this issue.
Just look at how Amazon has done this year. Shares of Amazon are down 29% from their highest point over the past 52 weeks, making one of the worst performers in the Standard & Poor’s 500.
“Frustration with AMZN is reaching peak levels,” says Ross Sandler, analyst at Deutsche Bank, in a note to clients.
Analysts were quick to point out the aspects of Amazon that are most troubling including:
Weak revenue forecast for the fourth quarter. The guidance for 12.5% reveue grwoth is nowhere near what investors expect from Amazon, Sandler says. “Amazon’s largeset markets are slowing an the company is hitting law of large numbers,” he says.
Spending is “out of control.”At least that’s what Michael Pachter of Wedbush Securities wrote in a note to clients. A recent $100 million spent on original online streaming content during the quarter shows that management is intent on building that business, no matter the cost, Pachter says. Such spending will pressure the company’s operating margin, he says.
No traction on Fire phone. The widely panned Fire phone dashes Amazon’s hopes of being a contender in the competitive smartphone market. A brutal $170 million inventory write-down on the phone hurt income, point out Chad Bartley, analyst at Pacific Crest in a note to clients.
Read more: $10B lost: Amazon delivers frustration