Amazon (AMZN) Stock Is Plunging. What Comes Next?

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Amazon (NASDAQ:AMZN) stock is trending on social media and sinking in early trading today after the e-commerce giant disappointed Wall Street with lackluster fourth-quarter guidance. As of this writing, shares are dropping by roughly 10%.

This news saw Amazon’s market capitalization dip below $1 trillion for the first time since the beginning of the pandemic. In fact, AMZN stock held back the Nasdaq this morning, although the exchange is now treading in the green today.

Here’s what investors should know about Amazon moving forward.

AMZN Stock and Weak Guidance

Why all the disappointment with AMZN stock? In a recent release, the company predicted that its Q4 operating income would be between $0 and $4 billion. Further, Amazon believes that its top line will come in between $140 billion and $148 billion, meaningfully below the mean outlook of $155 billion.

“With the ongoing macroeconomic uncertainties, we’ve seen an uptick in AWS customers focused on controlling costs,” said Amazon CFO Brian Olsavsky on the company’s Q3 earnings call. The executive noted that higher Prime Video programming and marketing costs weighed on Amazon’s operating profit in Q3 as well. Olsavsky continued:

“The continuing impacts of broad-scale inflation, heightened fuel prices and rising energy costs have impacted our sales growth as consumers assess their purchasing power and organizations of all sizes evaluate their technology and advertising spend.”

The CFO added that Amazon expects these trends to continue in Q4.

Some Analysts Remain Bullish on Amazon

Despite the guidance pulling down AMZN stock, Goldman Sachs is still upbeat on the company’s long-term outlook. The firm believes Amazon’s e-commerce margins can increase. Margins will also be boosted by the continued large revenue gains of its cloud and ad businesses.

Also staying bullish is Morgan Stanley. The firm expects Amazon to benefit from market-share gains and cost reductions going forward. Analyst Brian Nowak lowered his price target on AMZN to $140 but maintained an “overweight” rating on shares.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.

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