After reporting both a top and bottom miss, Amazon fell 10.32 percent in after-hours trading. The company had ended the day at $403.01 and is now trading at $361.41. As a company, Amazon is valued by investors on the strength or weakness of its revenue growth.
Amazon’s current share count is 457.73 million. At a per-share loss of $41.60 so far today, Amazon has lost around $19 billion in value.
Amazon not only failed to meet street expectations in terms of profit and revenue, the company also had first-quarter earnings guidance that was immediately called down as lackluster. As CNBC reported after the news dropped, Amazon’s stated revenue guidance for the current quarter of between $18.2 billion and $19.9 billion was below the market’s expected guidance of $19.67 billion.
As a company, Amazon is not valued by investors on its current or near-term profitability. Investors have given the company wide berth to invest in its revenue growth. As such, the company’s owners are not expecting it to generate profit in a way that could be disbursed to themselves in the form of dividends — at least for now.
The other side of that coin is that Amazon’s external growth expectations are steep, as investors are allowing it to invest their potential profits into its expansion. This means that lower than expected revenue growth is something of a cardinal sin for the firm. And when it misses, as it did today, down goes the share price.
We’ll have to wait and see if the company can recover in after-hours trading. Apple, VMware, and Yahoo reported disappointing earnings this cycle. Facebook and Microsoft, on the other tip, had strong quarters.