Amazon shed half its value in 2022 as tech stocks got crushed

An Amazon driver loads packages into a delivery van at an Amazon delivery station on November 28, 2022 in Alpharetta, Georgia.

Justin Sullivan | Getty Images

It’s been a brutal year for mega-cap tech stocks across the board. But 2022 is especially rough for Amazon.

Shares of e-retailers are wrapping up their worst year since the dot-com crash. The stock has fallen 51% in 2022, marking its biggest decline since 2000, when it fell 80%. only Teslabelow 68%, and mapOff 66%, has had a bad year among the most valuable tech companies.

Amazon’s market capitalization has shrunk to about $834 billion from $1.7 trillion to start the year. The company fell out of the trillion-dollar club last month.

Much of Amazon’s woes have to do with the economy and the macro environment. Soaring inflation and rising interest rates have pushed investors away from growth and into companies with high profit margins, consistent cash flow and high dividend yields.

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But Amazon investors have other reasons to get out of the stock. The company is contending with slowing sales, as predictions of a post-Covid e-commerce boom remain unfulfilled. At the height of the pandemic, consumers depended on online retailers like Amazon for items ranging from toilet paper and face masks to patio furniture. That drove Amazon shares to record highs as sales soared.

As the economy reopens, consumers are slowly returning to shopping in stores and spending on things like travel and restaurants, causing Amazon’s impressive revenue growth to fade. The situation only worsened at the beginning of this year, as the company confronted high costs tied to inflation, the war in Ukraine and supply chain constraints.

Amazon CEO Andy Jassy, ​​who will replace founder Jeff Bezos at the helm in July 2021, has admitted that the company is hiring too many workers and building up its warehouse network as it races to keep up with pandemic-era demand. It has since paused or abandoned plans to open several new facilities, and its head count declined in the second quarter.

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Amazon’s 2022 drop vs. Tesla and Meta

Jassy has also conducted a broad review of the company’s expenses, resulting in the closure of several programs and a hiring freeze across the company’s workforce. Last month, Amazon began making what is expected to be the company’s largest job cuts in its history, aiming to lay off as many as 10,000 employees.

Even Amazon’s cloud computing segment, usually a refuge for investors, posted its weakest revenue growth to date in the third quarter.

Looking to 2023, some analysts have scaled back their estimates, citing continued macro headwinds and continued softness in online retail and cloud computing.

Evercore ISI analyst Mark Mahaney, in a December 18 note, lowered his 2023 estimate for Amazon, predicting total retail sales growth for the year of 6%, down from 10%. He cut his forecast for annual Amazon Web Services revenue growth to 20% from 26%.

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Still, Mahaney said he remains bullish on Amazon’s long-term prospects, calling it a “buffet buy” because of its diverse businesses. He pointed to Amazon’s growing share in retail, cloud and advertising, its clear insulation from risks such as ad privacy changes, and continued investment in areas such as groceries, health care and logistics.

“For those investors who use 2-3 year time horizons and are looking to take advantage of the latest dislocation in high quality ‘Net stocks, we highly recommend AMZN,” wrote Mahaney, who has an outperform rating on the stock. While recessionary issues are real and earnings estimates should decline, “AMZN remains arguably the highest quality asset we cover in terms of Revenue and Profit outlooks,” wrote Mahaney.

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