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FinanceAmazon

Here’s Why Amazon’s Shares are Plunging

Lucinda Shen
By
Lucinda Shen
Lucinda Shen
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Lucinda Shen
By
Lucinda Shen
Lucinda Shen
Down Arrow Button Icon
October 28, 2016, 1:41 PM ET

Amazon cut its winning streak short Thursday after unveiling a dissapointing third quarter earnings report.

The tech giant dropped $18 billion off its market cap in early trading Friday after reporting net income of $252 million, or $0.52 per share, falling below the $0.78 per share analysts had predicted.

Investors further soured when the company said a surge in spending on warehouses and video production during the holiday season would result in operating income ranging from $1.25 billion to zero in the fourth quarter—considerably below the Wall Street consensus of $1.62 billion.

The company is now worth roughly $368.8 billion.

As a result, CEO Jeff Bezos, who owns an 18% stake in Amazon, also lost a pretty penny—roughly $4 billion—as shares of the company slid 5%. Nonetheless, the executive, the third wealthiest man in the world, is still worth about $71 billion, according to the Bloomberg Billionaires Index.

Over the past 12 months, shares of Amazon however have risen 27% after the company posted quarter after quarter of profits. Just three months ago, Amazon revealed its its most profitable quarter yet, boosting shares to an all-time high of $847.21 in early October. The company’s stock is now down 7.7% from that high, and has lost over $30 billion in market cap.

Yet while the company’s third quarter earnings disappointed, it was still the tech giant’s sixth straight quarter of profits. Revenue from Amazon Web Services’ cloud platform, a segment that the company hopes will be a major growth-driver, also increased by 55% to $3.23 billion. That segment is expected to beat Amazon’s 2016 sales goal of $10 billion by $3 billion.

About the Author
Lucinda Shen
By Lucinda Shen
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