Shares of Amazon – dropped as high as 4 percent on Friday, the day after the retailer posted slow growth in its cloud and retail computing divisions and issued negative estimates.
The stock was hit more than its peers Apple and Alphabet
It also released its results on Thursday evening. The shares of Apple were trading at around 4 percent on Friday morning as Alphabet was down by 1 percent. Both companies fell both the bottom and top line.
The revenue of Amazon’s fourth quarter increased by 9percent in the fourth quarter to $149.2 billion, beating analysts’ expectations of $145.4 billion. However, the growth was tempered by a second period of slower growth in Amazon’s core retail division and the company’s Amazon Web Services, which have been impacted by the shaky economic climate.
Amazon announced that it anticipates earnings between $121 billion and $126 billion for the present quarter. Analysts had predicted $125 billion.
“Consumers are cautious, as well. Cloud deceleration rate seems to be at mid-teens for the first quarter,” analysts at Piper Sandler with an overweight rating for Amazon shares in a note on Friday.
“Above everything, the management remarks suggest that AMZN is still traversing through a challenging time,” the analysts added.
Despite the uncertainty in the near term many analysts are encouraged by CEO Andy Jassy’s efforts reduce expenses. They also believe that Amazon will demonstrate that it can endure the current economic turmoil and will keep growing over the long haul.
Jassy is working hard to reduce the costs of Amazon following a period of unprecedented expansion. The company announced it would cut more than 18,000 employees in its corporate department. The company imposed a hiring freeze within its corporate ranks, cut some projects, shut down some physical stores and stopped expansion of warehouses.
“While the coming quarters are likely to be uncertain as a result of macroeconomic uncertainty, the longer-term stories from Amazon and a compelling long-term risk-reward ratio should entice the investors.” Goldman Sachs’ Eric Sheridan wrote in a note released on Friday.
The mood of analysts was different for Apple and its message was that things are improving. This could be the reason why the stock is currently on the upswing. “Taking an unintentional step back and looking at the data, it’s not common to see Apple fail and slide down during the quarter, however we believe that the positives for the future of the presentation tonight far outweigh the negatives in the short-term,” the Morgan Stanley’s Erik Woodring wrote.
In the same way, despite Alphabet’s missteps analysts are optimistic about its future prospects in artificial intelligence, and have highlighted its robust core business. “We believe that Alphabet as a more secure company in 2023 and with more relative income stability, due to its utility in search and expense flexibility, as well as good margins that reduce cash flow issues, and the potential to boost the stock through buybacks,” the Bank of America’s Justin Post said.