Amazon stock plummets on revenue miss, guides lower on Q3: should you buy or sell?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jul 30, 2021
  • Amazon shares plunged more than 7% on Friday after announcing its most recent quarterly results.
  • It announced Q2 results on Thursday after markets closed, beating in earnings but missing on revenue.
  • The company also issued Q3 revenue guidance lower the Street forecast, prompting the price decline.

Amazon.com Inc. (NASDAQ:AMZN) shares plunged more than 7% on Friday, creating a downward price gap. The company announced its fiscal Q2 results on Thursday after markets closed, beating analyst expectations on earnings but missing on revenue. The online retail giant also issued disappointing Q3 revenue guidance well short of analyst forecasts.

Amazon posted a Q2 GAAP EPS of $15.12, beating analyst expectations by 23.61%. However, its top line of $113.1 billion came short by $1.98 billion despite growing by 27.2% from the same quarter a year ago.

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The e-commerce company also issued Q3 revenue guidance of $106-$112 billion, significantly lower the consensus Street forecast of $118.72 billion.

Analysts expressed concerns over Amazon’s rare sales miss, with Barclays attributing the occurrence to the unpredictability of markets in the post-pandemic period. On the other hand, JPM Securities cited slowing growth amid uncertainties surrounding market reopenings as a potential cause. However, both Barclays and JPM still maintain an overweight (buy) rating on AMZN shares with price targets of $4,130— down from $4,300 and $4,500, respectively.

Should you buy or sell AMZN stock now?

Despite the fiscal Q2 sales miss, Amazon still delivered better than expected earnings per share. In addition, analysts expect the company to have earnings growth of 81.90% this year and an average annual rate of 37.93 over the next five years.

Therefore, although Amazon’s price-earnings ratio of 68.51 and forward P/E of 49.78 seem steep from a valuation perspective, it offers exciting growth prospects making it an ideal stock for growth investors.

Therefore, Amazon’s massive pullback on Friday presents an opportunity to add a blue-chip high-growth stock to your portfolio.

Source – TradingView

Technical overview: Amazon stock price forecast for Q3 2021

Technically, the AMZN stock price appears to have plummeted to find support at the 100-day moving average. It also fell closer to oversold conditions of the 14-day RSI in the intraday chart. Both indicators suggest now could be a great time to target a rebound.

Therefore, investors can target potential rebound profits at approximately $3,434 or higher at $3,525. The support levels are $3,248 and $3,152.

Bottom line: the catalyst for buying AMZN shares now

In summary, although Amazon shares plunged Friday, it is still one of the most exciting growth stocks to buy. Therefore, the pullback could be an opportunity to add AMZN stock to your portfolio ahead of a potential rebound.

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