It wasn't exactly a prime showing.
Amazon shares fell as much as 9% in after-hours trading Thursday following its third-quarter earnings report, with the stock recovering to a 1.3% loss by Friday afternoon.
The move was in part due to Amazon's return to investing heavily in its business, which weighed on profitability.
Despite the initial plunge, experts don't think Amazon's next quarter — for which the e-commerce giant issued weaker-than-anticipated guidance — will play out as badly as feared.
Here's what six of them said about the report:
Tuna Amobi, industry analyst at CFRA, said Amazon's meaningful investment boost was something his firm "could live with":
"This part quarter, [Amazon] spent $9 billion on shipping. This current Q4, they're guiding for one-day delivery alone to impact the results by $1.5 billion, which is double what we saw in the third quarter. So, the trend line continues to increase. … The one-day delivery that we're seeing, I think, the data points that we see, kind of reassure us that it's actually the right step for the long term. Prime members are ordering more in terms of volumes, as well as value of the order, and the long-term economics of the one-day delivery so far seem to have justified the ratcheted investments that we're seeing. So, yes, the return to a heavy investment cycle is something that we can live with."
Karen Finerman, co-founder and CEO of Metropolitan Capital Advisors, didn't find the stock particularly attractive, but she didn't think the earnings results changed the story:
"Spend, spend, spend, right? They can afford to do it. … I don't think, if you're a bull and that's part of your thesis on the story, that anything that came out right now should change that. And they gave this guidance of [$]80 to [86.5] billion; that is an enormous range. So, they're just kind of throwing that out there. I wouldn't read that much into that as well. So, it's too expensive for me. This doesn't really change it [to], 'Oh, now it's in the range of excellent value,' so, it's not really my thing, but the thesis is intact."
D.A. Davidson analyst Tom Forte said there was more to like in Amazon's report than people might think:
"I definitely think you're seeing better performance out of Microsoft and then, to a lesser extent, out of Google, so it is a tougher competitive set for cloud. On the profit side, though, they still had more than $4 a share in earnings, and the three big profit drivers besides [Amazon Web Services] as one are advertising and mix of third-party retail. So, yes, the deceleration sequential for cloud is concerning, but it's still a big profit driver along with third-party retail and advertising, and you still had four bucks-plus a share in earnings."
Gene Munster, managing partner of Loup Ventures, said Amazon upping its investments was "absolutely" the right move:
"How do I view it? It is absolutely the right thing for them to be in this investment mode. It's the right thing for them to push for consumers to think even more broadly about their wallet versus Amazon, and one day, as a powerful proposition around that. But ultimately, you need to continue to grow that base of Prime users. About two-thirds of the U.S. has Prime memberships. Now, ultimately, that could probably go to 75%. So, there is some room for upside. But it does get more difficult to continue to climb, and I think this all circles back to the core underlying question, which is what's the multiple you pay for that growth outlook? And my belief is we're probably fairly valued right now."
Strategic Wealth Partners CEO Mark Tepper shared what he was telling his firm's clients:
"This is one of our core holdings. I would look at this as a buying opportunity, so, I would expect probably a call from a client or two … to try and figure out what's going on. And, basically, what I'm going to tell them is a few things. No. 1, the weak guidance is pretty typical for Amazon. They are notorious for sandbagging their holiday projections and then just blowing right through them. Right now, they are investing from a position of strength, right? They've got a significant competitive advantage and they're spending money right now to continue to strengthen that competitive advantage, and it's still too cheap given the growth that this thing offers over the course of the next few years. I think fair value's [$]2200 to 2400 on Amazon."
Jefferies analyst Brent Thill said Amazon is notorious for under-selling its forecasts:
"Good Q3, bad Q4 guide. Again, the big investment in one-day deliveries really weighing on the story. There's no way they can offset these expenses. It's manual. You can't deliver packages any quicker or more efficiently, so many of the logistics experts continue to point to short term. There's a big investment mode. Amazon was going through harvest mode showing earnings upside, and now we're back into investment mode, and I think many investors are saying, 'Wait and see until they get out of this investment mode for these current investments to pay off.' Remember, typically, Amazon's pretty conservative. They did beat the top line and bottom line this quarter relative to our numbers, but, effectively, they've always given pretty conservative guidance, so our belief is that they'll surpass what they typically say. But that's going to continue to weigh on the short term given the investments they're making."
