Shares of Amazon (AMZN - Free Report) dipped again on Thursday, amid what has already been a rough August for the online retail powerhouse. The company has seen its stock price plummet almost 12% over the last month.
Based solely on the number of times that Amazon has been referenced in the same breath as “changing the world” or “ending retail as we know” in the last year, it would be all too easy to assume that the company became impervious to growing pains.
Yet, shares of Amazon fell by as much as 1.40% Thursday to hit an intraday low of $945.20 per share, which is over $120 a share below its 52-week high.
Amazon might very well still be on its way to global retail domination, so why has the online powerhouse shown signs of vulnerability over the last month?
What’s Going On?
Jeff Bezos’ company saw its stock price skyrocket from $759 a share a year ago to hit an all-time intraday trading high of $1083.31 per share on July 27, directly ahead of its second-quarter earnings report.
Later that day, Amazon announced that its revenues soared 25% year-over-year to $38 billion and operating cash flow jumped 37% to $17.9 billion. But Amazon fell way short of earnings estimates and has seen its stock price regress steadily since then.
Evercore ISI technical analyst Rich Ross cautioned Amazon investors that the "stock is in a vulnerable technical position" on CNBC’s "Power Lunch" on Thursday.
"In three of the last five years, the stock has had 30 percent pullbacks,” Ross told CNBC. “That's not the base case here, but with the stock just 10 percent off an all-time high going into the worst month for stocks historically, I would not be a buyer… I would be a buyer lower—down around $900, $870."
The simple fact that the company is actively trying to expand its business at break-neck speeds has negatively impacted Amazon’s bottom line (also read: It's a Go: Amazon-Whole Foods Merger Gets FTC Approval).
Amazon has tried to rapidly expand everything from original programming and media content to its shipping business, sometimes to the detriment of near-term gains. However, investors seemed undeterred by the company’s massive, at all-costs expansion until the late-July and August pullback.
"It's not that they're not making revenues—they're still taking over the world—it's just way more expensive than they originally thought. And so technology costs and marketing costs are both significantly higher," S&P Global portfolio manager Erin Gibbs told CNBC on Wednesday. "I'd say we could see more of a decline until we see some stabilization of those costs."
It seems clear that investors might need to come to terms with Amazon’s expansion harming the company’s profits—while top-line sales soar—for the foreseeable future.
Major old-school retailers have fought back in a big way recently. Wal-Mart’s (WAL - Free Report) online transactions climbed 60% in Q2, while the company also posted same-store U.S. sales growth for the 12th-consecutive quarter.
The big-box retailer helped to show the retail industry and investors that all hope is not lost in the fight against Amazon in one simple way: major retailers can become competitive e-commerce players with the right tactics.
Amazon seems to be looking far into the future with the array of unique, non-linear moves and acquisitions. But this has reduced the company’s current value for investors. Amazon is a Zacks Rank #5 (Strong Sell) and scored an “F” for Value and a “D” for Momentum in our Style Score system.
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