Last week, Amazon (NASDAQ: AMZN) released its results for the second quarter of this year. With a near 8% fall in the share price after the announcement, it was clear to see investors were not too impressed by the results. However, the stock is up 8% over the past year. Off the back of a strong performance during the pandemic, is now a good time for me to buy shares as we see a fall in the price? Let’s take a look.
My colleague Edward Sheldon posed a similar question back in May after Amazon’s solid Q1 results, and there were also many positives to take away from Amazon’s latest results. Net sales increased by nearly 30%, to $113bn. Further, net income increased by just over $2bn, while operating income increased by over 30%.
If Amazon’s results saw an increase in many aspects, then why did the share price fall? Well, although this seems solid, certain figures fell short of both analysts’ expectations as well as Q2 2020 performance. For example, net sales rose 41% in Q2 of last year. To add to this, the outlook for Q3 of this year also dampened investor’s confidence. The company stated an estimate of between a 10% and 16% ($106bn-$112bn) growth rate for Q3 sales, somewhat below the $119bn estimates. This, I suspect, was a significant reason in the Amazon share price dip. With all said, the above figures still represent growth. At a time when many parts of the world are beginning to reopen, I think a fall in sales could be expected as people begin to revert to physical stores.
However, I think Amazon at the current price provides many opportunities. Firstly, the business continues to diversify. For example, Amazon Web Services (AWS) is expanding. AWS is a subsidiary of Amazon, offering cloud platforms to companies and governments. The Q2 results highlighted an array of large firms that have opted to use AWS as their official cloud provider. As they continue to grow, innovations like this could lead to a surge in the future Amazon share price.
To add to this, global e-commerce sales are predicted to continue growing. In the US alone they are expected to top $1trn in 2022. With Amazon being a spearhead in e-commerce, a boost in sales would no doubt lead to a rise in the Amazon share price.
The company is also constantly looking at ways to improve performance. In the UK, it announced plans to create 10,000 new corporate and operations jobs, while also investing £10m over three years to train 5,000 employees. This, long-term, could have very positive effects for Amazon.
Should I buy?
For me, the fact many people were sceptic about a 27% growth in net sales shows the strength of Amazon. The firm is placed in a market that has grown massively during the pandemic, and I can only see it continuing to do so. Although some were dubious about the founder and former CEO, Jeff Bezos, announcing his plans to step aside from the company, I believe this does not pose an issue. I think this dip in the Amazon share price presents a great opportunity, and as such now I would deem a good time for me to buy.