AmazonShares closed down 7.56% at $3327.59 on Friday. The company's results released yesterday showed that second-quarter revenue and third-quarter earnings guidance fell short of market expectations, led to lower target prices by several investment banks and a record 746 million euros ($888 million) fine imposed by the European Union for violating data privacy regulations.
Amazon reported second-quarter revenue of $113.08 billion, up 27.2% from a year earlier, the third consecutive quarter of more than $100 billion, but below market expectations of $115.2 billion. Looking ahead to the third quarter, Amazon expects revenue of between $106 billion and $112 billion, a year-on-year increase of 10%, 16%, below market expectations of $119.2 billion.
After the release of the results, a number of major Wall Street banks released research reports, one after another cut Amazon's target price, a number of analysts expect the company's short-term growth will slow, but still optimistic about its long-term growth prospects.
UBSAnalyst Michael Lasser lowered Amazon's target price to $4020 from $4350, but maintained its "buy" rating.
Amazon's second-quarter revenue was lower than expected as consumers returned to stores to participate in more leisure activities and reduced online spending, the analyst told investors in a research note. But Amazon still accounted for 44 per cent of total new online spending this quarter, up from 36 per cent typically in the past five years, Lasser added.
Oppenheimer analyst Jason Helfstein lowered Amazon's target price to $4200 from $4400 and maintained its "outperform" rating. Helfstein told investors in a research note that he expected Amazon's growth to slow in the second half of the year, but he remained bullish on the company's long-term growth prospects.
Credit SuisseAnalyst Stephen Ju lowered Amazon's target price to $4700 from $4850 and maintained its "outperform" rating.
While most investors are focused on third-quarter revenue guidance that fell short of market expectations, Ju believes that more importantly, capital expenditure will continue to rise as Amazon continues to build a "last kilometer" distribution system in preparation for the expansion of Prime members' one-day delivery services. However, Ju said he might buy when the share price pulls back.
Morgan StanleyAnalyst Brian Nowak lowered Amazon's target price to $4300 from $4500, still maintaining its "overweight" rating.
In addition, Amazon was fined a record 746 million euros by the European Union for violating EU General data Protection regulations (GDPR), according to media reports.
Amazon then responded that the fine was groundless. "there are no data leaks and no user data has been exposed to any third party."
It is reported that this is the largest fine since the EU GDPR rules came into effect in May 2018.