Apr 30, 2020 - Economy

Amazon stock falls after tech giant forecasts billions in coronavirus spending

Photo: Leon Neal/Getty Images

Amazon's stock was down nearly 5% in after-hours trading Thursday after the tech giant said that shareholders should expect coronavirus-related costs to eat up all the $4 billion in profits it would expect for Q2.

"If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small."
— Amazon said in a statement

Details: The tech giant says that under normal circumstances it would expect to make roughly $4 billion or more in operating profit, "but these aren’t normal circumstances," the company said.

  • The company missed on earnings per share expectations but beat revenue expectations for the quarter ending in March.

Yes, but: The virus has weighed on Amazon's operating costs, particularly because supply chain disruptions hampered its e-commerce business. Yet its fastest-growing division (advertising) and its highest margin division (cloud) both did well, and despite the logistical challenges, demand was way up for e-commerce.

By the numbers per CNBC:

  • Earnings per share (EPS): $5.01 vs. $6.25 expected by Refinitiv consensus
  • Revenue: $75.45 billion vs. $73.61 billion expected by Refinitiv consensus
  • Amazon Web Services (AWS) revenue: $10.22 billion 

Be smart: "Amazon's huge topline acceleration isn't a complete surprise amid the pandemic's shifting consumer spending in favor of ecommerce and online grocery," says eMarketer principal analyst Andrew Lipsman. 

  • "The bottom-line performance was on the lighter side, but not altogether unexpected in light of the ecommerce business's escalating costs of labor and delivery logistics and shift in mix towards less profitable categories like grocery."

The bottom line: After several consecutive quarters of monster growth, expect a more conservative second quarter from Amazon as the virus crisis weighs on its delivery and ecommerce businesses.

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