Amazon Shares Plunge After Tech Giant Forecasts Disappointing Holiday Sales

Amazon logo is seen in front of a decreasing stock graph in this illustration taken on April 29, 2022. Dado Ruvic/Reuters

Shares of Amazon plunged on after-hours trading on Thursday after the company predicted less than spectacular sales for the important holiday shopping season.

Amazon shares were down almost 20 percent in extended trading after the Seattle-based tech giant predicted revenue would be $140–148 billion in the three-month period ending the year, missing out on analysts’ average estimate of $156 billion.

The plunge in shares wiped roughly $202 billion of its valuation and marked one of the biggest one-day sell-offs in history.

The company reported revenue of $127.1 billion in the third quarter, narrowly missing out on analysts’ forecasts of $127.5 billion, while net income fell to $2.9 billion, or $0.28 per share, down about 9 percent from the third quarter a year prior.

Andy Jassy, Amazon’s chief executive, said he was “encouraged by the steady progress we’re making on lowering costs in our stores fulfillment network, and have a set of initiatives that we’re methodically working through that we believe will yield a stronger cost structure for the business moving forward.”

“There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” Jassy said. “What won’t change is our maniacal focus on the customer experience, and we feel confident that we’re ready to deliver a great experience for customers this holiday shopping season.”

Amazon’s outlook comes amid growing concerns that an upcoming recession could amount to a rough holiday season on the back of weaker sales as consumers look to tighten their budgets.

Stock Market Sell-off

While business boomed for Amazon during the COVID-19 pandemic amid a surge in online shopping, the online retailer has joined a string of other tech giants, like Google and Microsoft, which have reported disappointing numbers in recent months, sparking a widespread stock market sell-off.

The stock price of Google’s parent company, Alphabet, also plunged on Tuesday after it reported that third-quarter revenues grew 6 percent, to $69.1 billion from $65.1 billion, while net income was down almost 27 percent, from $18.9 billion to $13.9 billion.

“We are focused on both investing responsibly for the long term and being responsive to the economic environment,” Sundar Pichai, CEO of Alphabet and Google, said while announcing the results (pdf).

Elsewhere, the share price of Meta also fell more than 20 percent on Wednesday, after the company posted similarly disappointing results.

Meta CEO Zuckerberg told investors during an earnings call that Meta is battling a number of issues, including a “volatile macroeconomy, increasing competition, ads signal loss, and growing costs from our long-term investments.”

Apple and Microsoft have also seen their share prices drop amid a broader tech stock sell-off amid a volatile economy.

According to a recent McKinsey Consumer Pulse survey of more than 1,000 consumers in the United States between the ages of 15 to 74, conducted between Sept. 27 to Sept. 29, 55 percent of respondents said they are excited about holiday shopping, and almost 40 percent said they intend to splash out on themselves or others.

However, given that the Consumer Price Index has climbed 8.2 percent over the past year, the majority of consumers will be more strategic in how they spend their hard-earned cash, the survey showed, with nearly half of respondents stating that they would switch stores if they found a better price elsewhere.