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Amazon’s $370 billion share wipeout tests Wall Street’s love

It’s rare to see just about everyone on Wall Street agree on something, but that’s the case when it comes to Amazon.com.

Every single analyst who rates the stock — all 55 of them — recommends clients buy it, according to Bloomberg data. Active fund managers “are even more overweight” the name now than they were a year ago, per a Bank of America report on August 10.

Yet that ubiquitous bullishness is being put to the test as last month’s unexpectedly weak sales forecast complicates the company’s growth narrative. As Amazon co-founder Jeff Bezos blasted off into space, the company’s stock fell back to Earth. The shares have tumbled about 15 per cent from a peak in early July, erasing about $US267 billion ($373 million) in value, as investors question its prospects on the other side of a pandemic that turbocharged demand for its services.

As Amazon co-founder Jeff Bezos blasted off into space, the company’s stock fell back to Earth.

As Amazon co-founder Jeff Bezos blasted off into space, the company’s stock fell back to Earth.Credit:AP

Shares fell 0.4 per cent on Thursday. Earlier this week, the stock closed below its 200-day moving average for the first time since June, and it is now lower than where it started the year.

“The market rewards growth, and it doesn’t look like Amazon has any catalysts for increased spending of its users or picking up more users,” Kim Forrest, founder and chief investment officer of Bokeh Capital Advisors, said in an interview on Bloomberg Television.

The company’s reported plan to open several large department-store-like locations in the US doesn’t appear to be the news that will turn the stock around. The Wall Street Journal’s report was based on unnamed people familiar with the matter.

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Amazon’s poor performance stands out among US companies valued at more than $US1 trillion, as well as the market as a whole. Apple, Microsoft, and Google’s parent company Alphabet all hit records this week, as did the S&P 500 Index. Facebook is about 5 per cent below its own record close.

The e-commerce company’s disappointing outlook last month came along with revenue that missed estimates for the first quarter since 2018. Analysts have pared back their expectations in the wake of the report. For Amazon’s current quarter, the average earnings estimate has dropped about 16.5 per cent over the past month, according to data compiled by Bloomberg. The revenue consensus has fallen by nearly $US6.5 billion, or 5.5 per cent, over the same period.

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