Seeing e-commerce titan Amazon (AMZN) down nearly 10% is an unusual and unsettling experience. But that’s what we got today as Amazon’s third-quarter outlook didn’t have much to like about, and shareholders responded accordingly.
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Amazon’s second-quarter earnings report didn’t turn out so hot. It managed to miss on revenue, if only just; analysts were looking for $148.56 billion and all Amazon could muster was $147.98. That’s not exactly a huge miss—and it’s still over a hundred billion bucks brought in—but it was enough to worry investors.
And the outlook, meanwhile, wasn’t much better. The top end of Amazon’s projected range—$154 billion to $158.5 billion—was just barely over analyst projections that looked for $158.24 billion. That puts Amazon’s odds of turning out a beat in the next quarter pretty slim, and that meant deep concern from investors.
Hunting for New Revenue
In a situation like this, one might expect Amazon to fire up some layoffs and cut costs to improve its profitability. But Amazon is out to do something a little different; it’s looking for new revenue streams. Not a bad idea—it certainly will do the job—but it’s a little shakier and certainly less immediate than cost-cutting would be.
At any rate, Amazon plans to up its competition with Walmart (WMT) for digital media advertising sales. While Walmart has been selling ads for display in stores, Amazon is doing something similar with its own operations. It recently added the Amazon Marketing Cloud to AWS Clean Rooms, which allows users to improve advertising within current Amazon Web Services (AWS) accounts. Such a move makes Amazon advertising that much more attractive, and since AWS is a major part of Amazon, it may do the job of improving revenue all around.
Is Amazon a Buy, Hold, or Sell?
Turning to Wall Street, analysts have a Strong Buy consensus rating on AMZN stock based on 30 Buys assigned in the past three months, as indicated by the graphic below. After a 29.92% rally in its share price over the past year, the average AMZN price target of $228.21 per share implies 35.76% upside potential.
