Why is Amazon Stock Falling?
Despite having what it touted as its best Cyber Monday sales traffic ever, Amazon.com, Inc. (NASDAQ:AMZN) and Amazon stock still took a hit as investors were concerned over the company’s large discounts.
Falling about 1.5% on Wednesday, Amazon stock has faced a rather disappointing November, down three percent since the beginning of the month. Citigroup Inc (NYSE:C) analysts cut their price target on AMZN stock, citing the company’s discounting in order to compete during the holiday shopping season. (Source: “Amazon stock drops amid big discounting,” CBS, November 29, 2016.)
While Amazon stock continues to generate ever-increasing amounts of revenue, the company has a bit of a profitability hangup. In both 2012 and 2014, Amazon was in the red, with this year hardly being a stable one in terms of earnings.
CBS reports that some on Wall Street are concerned over the tech giant’s propensity to divert capital away from increasing earnings into infrastructure projects, like constructing new warehouses. Strange fact: these warehouses are called “fulfillment centers.”
Of course, despite the hit taken by Amazon stock, some writers are more celebratory in tone concerning the Cyber Monday success of the retailer.
As we reported in an earlier story:
Consumers are expected to have blown $3.36 billion in online sales during Cyber Monday, 9.4% more than they spent last year, according to Adobe Digital Insights. Between midnight and 10 a.m. alone, sales topped $540.0 million, $205.0 million of which took place through mobile phones. (Source: “Cyber Monday promotions run wild as retailers battle mighty Amazon,” MarketWatch, November 29, 2016.)
Even the National Retail Federation says that online shopping is taking over, claiming that in-store traffic continued to fall, while the number of digital consumers rose 4.2%. These trends lead to hard cash in the pockets of online retailers like Amazon.
The question is: will these benchmark-shattering numbers be enough to satisfy Wall Street investors more concerned about being in the black than increasing revenue?
Either way, Amazon stock is still on par for a strong 2016, up 11.5% since the beginning of the year.
Editor’s Note: Hi, Stephen Karmazyn here. If you enjoyed this article, you can get more of my opinions and commentaries in our popular daily tech letter, Profit Confidential. Published daily, it’s FREE! .