Why Amazon.com, Inc. (NASDAQ: AMZN) stock is under pressure

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Amazon.com, Inc. (NASDAQ: AMZN) stock opened weak and fell over 1.5% on 25th October, 2019 (as of 12:23 pm GMT-4 ; Source: Google finance) of 25th October, 2019 after the company posted mixed results for the third quarter of FY 19. The company has reported 26% fall in the net profit in the third quarter of FY 19 to $2.1 billion, which is the first decline in more than two years. Amazon’s world-wide shipping costs has risen by whopping 46% to $9.6 billion from the previous year. For this year, the company expects the spending to be even higher as the company investing in offering one-day free shipping for Prime members. Last quarter, AMZN had spent more than the estimated $800 million for the next-day shipping, as the company incurred higher costs in shifting the warehouses and bringing the inventory closer to customers.  As a result, online sales growth gained momentum with 22% rise in the sales from online stores in the third quarter. This is double the growth rate a year earlier.

Amazon.com Inc. Nasdaq AMZN

AMZN in the third quarter of FY 19 has reported the adjusted earnings per share of $4.23, missing the analysts’ estimates for the adjusted earnings per share of $4.59, according to FactSet. The company had reported the adjusted revenue growth of 24 percent to $70 billion in the third quarter of FY 19, beating the analysts’ estimates for revenue of $68.83 billion. The third quarter included Prime Day, a July shopping event made to sign up new Prime subscriptions by providing its members steep sales discounts.

Moreover, Amazon Web Services, the company’s main profit center, also reflecting slowing growth. The unit posted 34.7% rise in sales to $9 billion but below the 37% clip of the previous quarter. Amazon’s advertising business reported 43.7% rise in sales to $3.6 billion from the year-earlier period. Amazon’s international business, has posted another operating loss for the quarter, and the profit fell 37% in its North American unit, which includes the bulk of its e-commerce operations. The physical stores segment experienced the steepest decline in sales over the last year.

Amazon also gave a weaker profit outlook for the fourth quarter of the year, which includes the holiday season. The company expects its operating income in the fourth quarter to range between $1.2 billion and $2.9 billion, which is -down from $3.8 billion a year ago and below the $4.2 billion estimated by analysts.

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