Amazon.com Inc, the company that has enthralled investors for years with its improbable growth, seems to have encountered a fairy-tale ride on Wall Street as it has hit its most jarring bump once again.
After earning one of the tech sector’s highest valuations, the e-retailer giant drew widespread ire after a spectacular results disappointment on Thursday.
The firm missed the expectations across the board on its net loss and on revenue. An unaccountably meager seven to 18 percent revenue growth forecast for the usually strongest holiday quarter came as the final straw for some.
The warning, which has come just three months after a big comedown in July this year, may signify a tipping point for the investors who are already cautious of a triple-digit price-earnings ratio and a constant unwillingness to strangle back spending.
Matthew Benkendorf, portfolio manager at Vontobel Asset Management, said, “They are becoming too much distracted in all these other efforts outside core businesses like online retailing and web services. They are their own worst enemy to success. They really need to do some soul searching and get focused.”
Benkendorf had unloaded his holdings at the Amazon last year and also said that he would be cynical of his future involvement with the firm even if the stock falls further.
Amazon CEO Jeff Bezos had for long weaved a spell over the Wall Street while riding the track record for toppling the retail sector with the company’s less-expensive and speedy-delivery model. But Bezos has highly sought leading positions in Internet computing, digital media and on-demand services.
Market experts say investors have given the Amazon CEO a lot of flexibility, thanks to his past successes, including the launch of Amazon Web Services.
“But now the firm is entering a phase when many of its investors are expecting to see profit improvements, said Andrew Cupps, president of Cupps Capital Management in Chicago.
Cupps hold about 20,000 shares of Amazon. He held around 30,000 shares of the company earlier this year.
Talking about the unhappiness of the investors, Wells Fargo analyst Matt Nemer, said,“Frankly, we believe it’s impossible to predict Amazon’s profitability during this prolonged ‘investment cycle,’ but profit metrics are clearly not moving in the wrong direction and it’s a fair question to ask, does Amazon have too many ‘balls in the air?’”
The market analysts say it would be interesting to watch how the e-retailer giant regains the losing trust of its investors in order to maintain its pace in the retail sector.