Holiday slump could cut 10% off Amazon shares
Is Amazon.com Inc. (NASDAQ: AMZN) likely to reach another 52-week low soon? If it posts poor holiday sales, there is every chance its shares could sell off another 10%, which would put them the below the current 52-week figure of $284.
Amazon has already signalled the current quarter will be poor, both in potential revenue gain and a strong chance of posting another loss.
When the e-commerce company released its most recent numbers, management looked ahead at the current period with net sales expected between $27.3 bln and $30.3 bln, or to grow 7-18% compared with fourth quarter 2013; while, operating income (loss) was expected to be between $(570) mln and $430 mln, compared to $510 mln in the fourth quarter 2013.
This raises two problems. The first is that a 7% improvement in revenue in the holiday season would be a disaster. The second is that Wall Street is tired of losses.
It has been assumed for some time that as Amazon consolidates it position in e-commerce, and brick-andmortar retail sales continue to weaken in favour of those online, the company’s top line should grow in the double digits. Amazon would need to suffer an erosion of many advantages for revenue to grow only 7% this quarter.
As far as its bottom line is concerned, investors are weary of the repeated experiments by founder Jeff Bezos. These run from new consumer electronics products like its Fire smartphone to Amazon TV.
At $313, Amazon’s stock is much closer to its 52-week low of $284 than its high for the period of $408. It will only take one large stumble during the holidays for the share price to run toward $280 or below.