Is Amazon's Growth Story Over?

| About:, Inc. (AMZN)

Amazon (NASDAQ:AMZN) delivered $16.07 billion in sales for the quarter, under analyst expectations, taking the stock down over 7%. You can't say I didn't warn Amazon investors to expect this very sales shortfall. Back in February, I predicted decelerating revenue growth. It is my belief, this quarter's revenue miss is just the first of many such misses.

Amazon is locked in a disturbing revenue growth slowdown, a trend that has been building for eight quarters. This quarter sales growth dropped a smidgen to 21.9%, neatly fitting into my thesis that there is a whole lot of decelerating going on at this Internet retailer.

Sales growth has been dramatically contracting over the last eight quarters:

You can see the worrisome slowdown in revenue growth in the chart below.

Next quarter Amazon is predicting that sales will grow between 13% and 26% - the midpoint being 19.5% - suggesting another slowdown in the works.

All this shouldn't come as a surprise: Amazon has been guiding down its sales growth for eight consecutive quarters. When a company tells you its growth spurt is going away, you know its days on the all-time high list are numbered. Take a look at Amazon's guide down and note how the mid- range guidance keeps going down.

Here's a graph of Amazon's predicted revenue growth at the mid-point of the range.

By the way, the market doesn't care what Amazon earns, only how much it sells. Short sellers have focused on Amazon's lack of earnings for years and they have gotten killed as the stock has risen (inexplicably to them) on the back of sensational revenue growth. Once again, the market ignored Amazon's earnings performance. Despite a 9 cent earnings beat, investors focused on Amazon's revenue miss and sent the stock down.

This quarter confirms the trend: Amazon's revenue growth is cooling down. Investors should expect more mundane growth, putting Amazon's nosebleed P/E in jeopardy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.

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