In 2022, Amazon lost half its value as tech stocks crashed

It’s been a brutal year for megacap tech stocks across the board. But 2022 was particularly difficult. Amazon.

E-retailer stocks are ending their worst year since the dot-com crash. In the year The stock is down 51% in 2022, marking its biggest decline since 2000 when it fell 80%. Only Tesla68% decreased and MetaDown 66%, they had the worst year among the most expensive tech companies.

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

Most of Amazon’s opportunities are tied to the economy and the macro environment. Rising inflation and interest rates drove investors away from growth and into companies with high profit margins, consistent cash flow and high dividends.

But Amazon investors had other reasons to exit the stock. The company is slowing sales as forecasts for continued post-Covid e-commerce growth have not been met. During the pandemic, consumers relied on online retailers like Amazon for everything from toilet paper and face masks to patio furniture. That led Amazon’s stock to record highs as sales surged.

As the economy reopened, consumers slowly returned to shopping and spending on things like travel and restaurants, dimming Amazon’s impressive revenue growth. The situation worsened earlier this year as the company faced higher costs associated with inflation, the war in Ukraine and supply chain constraints.

In the year Amazon CEO Andy Jassy, ​​who will take over from founder Jeff Bezos in July 2021, has admitted the company has hired too many workers and overbuilt its warehouse network as it races to meet demand during the pandemic. Plans to open some new facilities have stalled or been scrapped, and headcount declined in the second quarter.

Jassy launched a broader review of the company’s costs, resulting in the closing of some programs and layoffs among its corporate workforce. Last month, Amazon began the largest corporate job cuts in its history, aiming to lay off up to 10,000 workers.

Even Amazon’s cloud computing division, a particular haven for investors, posted the weakest revenue growth in the third quarter.

Looking ahead to 2023, several analysts have lowered their forecasts, citing persistent macro headwinds and continued softness in online retail and cloud computing.

Evercore ISI analyst Mark Mahaney on Dec. 18 lowered his 2023 forecast for Amazon to 6% overall retail sales growth, down from 10%. It lowered its forecast for annual Amazon Web Services revenue growth to 20 percent from 26 percent.

Still, Mahaney said he remains bullish on Amazon’s long-term prospects, calling it an “acquisition buffet” because of its various businesses. He pointed to Amazon’s growing share of retail, cloud and advertising, protection against risks such as ad privacy changes, and continued investment in areas such as grocery, healthcare and logistics.

“For investors with a 2-3 year time horizon and looking to take advantage of the recent move in high-quality ‘net stocks, we recommend AMZN,” wrote Mahaney, who has an outstanding rating on the stock. While earnings estimates should be lowered as downside concerns materialize, “AMZN is arguably a high-quality asset that we cover from revenue and profit perspectives,” Mahaney wrote.

See: A recession could signal the end of headwinds for tech stocks like Amazon and Meta.