Despite record profits, Amazon shares sink on disappointing sales

Amazon sinks as revenue growth disappoints

Amazon tumbled 7.1 percent after it not just missed quarterly sales estimates, but also gave a below par holiday-season sales forecast.

A drop of that magnitude would have the stock down more than 20%, putting it in a bear market. Its overall subscription revenue, which comes not just from Prime, but also from Audible.com, Amazon Music, and other services, grew 52% from the third quarter past year to $3.7 billion. Analysts watch Amazon's revenue growth more closely than any other indicator of the company's future health. "The second thing is they're anxious about competition", he said, noting that there were both signs of a slowing economy and that major retailers were aggressively deploying strategies to compete with Amazon for holiday sales. "They had been hitting on all cylinders so this is something investors weren't ready for", Chaim Siegel, analyst at Elazar Advisors, said. So far, Amazon has said that hasn't happened.

"Amazon Business is adding customers rapidly, including large educational institutions, local governments, and more than half of the Fortune 100", Bezos said. After blazing a path beyond $2,000 earlier this year, imputing a valuation of the company of $1 trillion, the stock price has fallen back a bit as tech stocks overall continue to get pummeled this fall.

Riding on its Cloud business, retail giant Amazon.com saw its net sales increasing 29 per cent to $56.6 billion in the third quarter this year, compared with $43.7 billion in third quarter of 2017. The company also issued weaker than expected revenue guidance.

Those results combined with rising expenses brought down the company's operating margin to 25 percent from 28 percent a year ago.

"They're indifferent if they sell us their own merchandise or third-party merchandise, so they shouldn't be punished for the latter", said Michael Pachter, an analyst at Wedbush Securities.

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Those retail rivals made that change a few months after Amazon chose to raise Prime's annual fee to $119, which could hamper Amazon's sales.

In a time of low interest rates, Amazon and Google have offered investors the chance to hitch a ride on the fast-growing e-commerce, digital advertising and cloud-computing markets buoyed by a steady global economy, Bloomberg explained.

The fall of as much as 9 percent in shares knocked more than $80 billion off Amazon's market value and relegated it behind Microsoft Corp MSFT.O and Apple Inc AAPL.O in terms of market value. Wall Street was expecting $3.9 billion yet the company guided to $2.1 to $3.6 billion.

Amazon's chart shows that the stock is nearing two critical technical levels.

At Amazon Web Services, revenue jumped 46 percent to $6.7 billion.

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