Amazon.com Inc (Nasdaq: AMZN) reported lower-than-anticipated fiscal 2021 third-quarter earnings and revenues, primarily due to the ongoing global supply chain issues. The company also issued a weak fourth-quarter outlook. Following the earnings report, the stock lost 2.15% or $74.14 to close at $3,372.43.
The Seattle, Washington-based company reported third-quarter revenues of $110.812 billion, an increase of 15.20% from $96.145 billion in the similar period last year. Notably, revenues grew by 37% y-o-y in Q3 2020.
Operating income for Q3 2021 declined to $4.852 billion, from $6.194 billion in Q3 2020. Fulfillment expenses increased 25.80% to $18.498 billion. Likewise, marketing expenses rose by 47.40% to $5.434 billion. Provision for income taxes decreased to $569 million, from $1.155 billion.
For the quarter ended September 30th, 2021, the e-commerce giant posted a more than 50% drop in earnings to $3.156 billion, or $6.12 per share, from $6.331 billion, or $12.37 a share in the quarter ended September 30th, 2020. Analysts surveyed by Refinitiv had anticipated the company to report earnings of $8.92 per share on revenues of $111.60 billion for the latest quarter.
Andy Jassy, Amazon CEO, described how the company steered through the pandemic. “In the first several months of COVID-19, Amazonians played an essential role to help people secure the requisite PPE, food, and other in-demand items needed, and we worked closely with businesses and governments to leverage AWS to maintain business continuity as they responded to the pandemic.”
Segment-wise:
- Net product revenues grew by 3.98% y-o-y to $54.876 billion.
- Revenues from services, including Amazon Web Services, advertising, and Prime subscriptions, were $55.936 billion, up 28.90% from last year. For the first-time, services revenue has surpassed product revenues.
With the holiday season nearing, according to Jassy, the company anticipates spending “several billions of dollars” additionally to resolve labor scarcity, increase in employee costs, logistics issues and surge in transportation costs, and shore up its consumer business. Furthermore, Amazon has taken initiatives to add new shipping ports and increase its number of aircraft and delivery trucks.
According to CFO Brian Olsavsky, the company anticipates spending an additional $4 billion in costs linked to employee expenses and inflation.
Looking ahead, Amazon anticipates fourth-quarter sales in the range of $130 billion to $140 billion, reflecting a growth of 4% to 12% on a y-o-y basis. Analysts surveyed by FactSet are forecasting Q4 revenues of $142.10 billion, an increase of 13.20% on a y-o-y basis.
Furthermore, the company has forecast Q4 2021 operating income of between $0 and $3 billion, a sharp decline from $6.90 billion Q4 2020.
The quarterly earnings miss and weak Q4 guidance are expected to keep the stock of Amazon range-bound with a slightly bearish bias in the short term.
The historical price chart indicates that the stock is consolidating near $3250. Additionally, the stock is trading above its 50-day moving average, while the stochastics indicator is rising towards the bullish zone. Therefore, we are anticipating the stock to rally as the holiday season nears. The contradiction between fundamentals and technical is due to the reason that the market perceives the poor performance only as a temporary setback caused by supply chain issues.
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