Amazon founder Jeff Bezos had a great month of July as he launched into the atmosphere on his Blue Origin rocket, New Shepard.
However, his brainchild did not have such a fantastic time. Amazon (AMZN) is down by 7.5%. With online shopping booming since the pandemic, one might rightfully ask, why is this happening to Amazon the behemoth?
Amazon fell $2 billion USD short of its expected revenue. Even more concerning, Amazon’s tech peers, such as Microsoft, Apple, Google, and Facebook, easily exceeded their Q2 expectations. For the first time in a while, Amazon is the black sheep.
Investors should keep in mind that Amazon’s Q2 expectations were largely based off of its pandemic boom, during which the company recorded its first $100 billion USD quarter. Amazon could simply be settling towards pre-pandemic levels, and its Q3 forecasts reflect this as the company announced it expects to earn between $106 and $112 billion USD.
Brian Olsavsky, Chief Financial Officer of Amazon, explained their current trends with post-pandemic behavior: “Our customers are safe and healthy and ordering from us. And we know that there’ll be more… mobility. But it does tend to lead them to do other things besides shop. So we’re adjusting our run rates” (CNBC).
Facebook and Apple have warned of being affected by similar trends in the near future.
Regardless, this quarter’s events still makes one question Amazon’s current trajectory. It is the first time that the company has fell short of expectations in three years. While the company has modestly adjusted its Q3 forecast, investors are still sweating.
However, as mask mandates return due to the spreading COVID-19 Delta variant, and the possibility of future lockdowns loom, Amazon may experience unexpected gains if only caused by speculation.
Interestingly, Amazon has increased its ad revenue by 83% compared to Q2 2020. This can be explained by its huge boost in Prime members during the height of the pandemic. Investors may want to watch if marketers become spooked by Amazon’s decreased sales.
Ultimately, the uncertainty of Amazon’s Q3 rests on the uncertainty of the pandemic’s trajectory. Investors in Amazon stock will be best served by keeping a close eye on policy trends related to COVID-19.