(Reuters) – Stocks of Amazon.com Inc (AMZN.O) fell the most over the four years on Friday after the outlook for Christmas sales failed to meet targets, raising fears that Wall Street's tech favorites are finally facing stronger competition.
FILE PHOTO: The Amazon logo is on August 8, 2018 at the company's logistics center in Boves, France. REUTERS / Pascal Rossignol / File Photo
Third quarter results were the second time that billionaire Jeff Bezos' company had missed its sales targets and, in conjunction with a similar disappointment by Google owner Alphabet (GOOGL.O), they sent a shock wave through the stock markets.
There were no rating downgrades by the Wall Street analysts who had almost consistently supported the long-term prospects of the companies, but some said that they both face fiercer competition from tech peers and the retailers in which Amazon has bullied the last years.
The 9-percent drop in shares eased Amazon's market value by more than $ 80 billion, leaving it behind Microsoft Corp.MSFT.O) and Apple Inc. (AAPL.O) in terms of market value.
Now the Seattle-based company has devoured retail players like Borders, Sears, and Toys "R" Us, facing major challenges for multinational corporations investing heavily in the competition, D.A. Thomas Forte, Analyst at Davidson & Co.
"Google, Microsoft and Walmart … are harder to kill," he said.
Alphabet's stock fell about 6 percent, slipping around $ 45 billion from its market value, after surpassing sales in the last eight quarters.
The revenue from Amazon's international business, which accounts for 27.5 percent of total revenue, was the focus of the earnings decline. Growth halved compared to the previous quarter to 13.4 percent.
"We do not see a real structural problem with Amazon, but almost every line in the business is slowing down a bit, and we typically see a further slowdown in retail in the fourth quarter, struggling to identify a catalyst," said Barclays analyst Ross Sandler.
Amazon expects holiday spending in the holiday district to increase between 10 and 20 percent to $ 72.5 billion before Christmas, while analysts said it had peaked at $ 73.9 billion, according to refinancing data.
The operating profit forecast of $ 2.1 to $ 3.6 billion was also below consensus estimates.
Several analysts described the company's outlook as conservative and stated that a significant decline in profits was highly unlikely.
"Overall, Amazon's growth remains solid, including advertising, grocery, pharmacy and specialty retailers, as well as Amazon Business ($ 10 billion in revenue in eight countries) and Amazon Web Services," said Telsey Advisory Group analysts.
Company shares were up 9.0 percent at $ 1,622 in the morning trade.
Reports by Supantha Mukherjee, Sonam Rai and Jasmine I S in Bangalore; Arrangement by Patrick Graham