Amazon slips below US$1t in value after bleak outlook

AMAZON.COM’S market value briefly fell below US$1 trillion after its disappointing earnings report and outlook sent investors running for the exit.

The stock fell as much as 12 per cent on Friday (Oct 28) after the e-commerce giant projected the slowest holiday-quarter growth in the company’s history, while sales at its important web services business missed estimates. That sent Amazon’s market value down to about US$995 billion before the stock rebounded and closed with a decline of 6.8 per cent.

The stock had fallen as much as 21 per cent in after-hours trading Thursday. Amazon is joining a long list of US companies to see their market values crumble in this year’s bear market.

“It (stock sell-off) looks like an overreaction to us after a difficult earnings week for the group,” Piper Sandler analyst Thomas Champion wrote in a note. While the macro environment remains challenging, especially in Europe, the company’s forecast “looks conservative”.

The ranks of companies with valuations in excess of US$1 trillion have thinned this year with soaring US Treasury rates and the highest inflation in decades weighing particularly heavily on the stocks of technology companies. The Nasdaq 100 Index has fallen 29 per cent from last year’s peak amid rising risks to economic growth from supply chain snarls and Covid-19 lockdowns in China to the war in Ukraine.  

Electric-car maker Tesla, once worth more than US$1.2 trillion, has seen its market value tumble to about US$720 billion. Facebook parent Meta Platforms market value plunged by more than 75 per cent from its US$1.08 trillion peak last year, forcing it out from the ranks of the world’s 20 largest companies. Even Apple, whose massive cash flows and fortress balance sheet have made it a favourite destination for risk averse investors, briefly lost its title as the most valuable company in the world to oil giant Saudi Aramco.

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Amazon warns of meager holiday season sales growth

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The Covid-19 pandemic had helped supercharge Amazon’s businesses and propelled its value to a $1.88 trillion peak about a year ago. With growth now slowing and an uncertain macroeconomic backdrop, its shares have fallen about 38 per cent this year. Jeff Bezos, once the richest person in the world, was ranked No 3 as of Thursday.

“Amazon could trade range-bound until there is evidence of the macro storm clearing and a sustainable improvement in profitability,” said Brent Thill, an analyst at Jefferies who has a buy rating on the stock and a price target of US$135. BLOOMBERG