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It's Happening Again, Amazon's Q3 Is Being Classified As A Miss

Nov. 03, 2021 8:30 AM ETAmazon.com, Inc. (AMZN)COST, FDX, GOOGL, MSFT, TGT, TSLA, UPS137 Comments
Steven Fiorillo profile picture
Steven Fiorillo


  • AMZN reported Q3 revenue of $110.81 billion and $4.9 billion of operating income which was within its forecasted range from Q2 yet Q3 is being classified as a miss.
  • Cloud services infrastructure is expected to grow more than $1 trillion in annual spending over the next 9 years and AWS has 33% of the market.
  • AMZN is spending more in CapEx than MSFT, WMT, TGT, COST, FDX, and UPS combined as they invest heavily to drive future growth in e-commerce and cloud services.
  • I believe AMZN will become the first $1 trillion annual revenue company, and the amount of cash flow their current investments will generate in the future is going to be immense.

Amazon fulfilment centre

georgeclerk/iStock Unreleased via Getty Images

What on earth does Amazon (NASDAQ:AMZN) have to do for the market to get excited about them again? Once they reported on 10/28/21, the headlines began to surface that "Amazon badly misses

This article was written by

Steven Fiorillo profile picture
I am focused on growth and dividend income. My personal strategy revolves around setting myself up for an easy retirement by creating a portfolio which focuses on compounding dividend income and growth. Dividends are an intricate part of my strategy as I have structured my portfolio to have monthly dividend income which grows through dividend reinvestment and yearly increases. Feel free to reach out to me on Seeking Alpha or https://dividendincomestreams.substack.com/

Analyst’s Disclosure: I/we have a beneficial long position in the shares of AMZN, GOOGL either through stock ownership, options, or other derivatives. 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: I am not an investment advisor or professional. This article is my own personal opinion and is not meant to be a recommendation of the purchase or sale of stock. Investors should conduct their own research before investing to see if the companies discussed in this article fits into their portfolio parameters

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Comments (137)

Basit Saliu profile picture
Amazon is #1 in E-commerce, #1 in Cloud computing, #1 in AI, #1 in Smart speakers, #1 in Live streaming, #1 in CTV, Top 3 in Digital advertising, and Top 3 in Streaming media and then there is other businesses like IMDB, Amazon Games, Amazon Music, Amazon Publishing, Zoox etc. Amazon will definitely be the first company with $1 trillion in revenue.
m8 profile picture
fabulous article..... thanks.
mdpath profile picture
According to F.A.S.T graphs AMZN is under valued.
The author is clearly a believer in AMZN, which I appreciate as an investor, and thank you for the great level of detail and numerical analysis provided. While I have no argument that AMZN is a great business and will be around and growing for the foreseeable future, I think the stock will be dead money at best for a while. It’s all about slowing growth. It’s impressive that a company this size can grow at this pace, but it is slowing down. If AMZN can somehow recapture the previous growth rates, and starts showing profitability in segments not named AWS, the share price will follow.
Gary J is Rich on AMZN profile picture

AWS +38%, services sector booming, ad sales booming, on and on. My kind of slowing growth. LOL

Check out the 2 year chart. Only market timing guessers do not do that.
LasVegasInvestor profile picture
@nikolai.v510 Projected safe 31% long term operating cash flow growth is the analyst consensus. Love that kind of slow growth projections from a safe, 30% undervalued and AA credit rated company lol.
@LasVegasInvestor 31% projected cash flow in 5 years would be a projected stock price of $13,572 in 5 years. As for this coming Wednesday, Rivian the Electric Vehicle IPO goes public with an estimates market value of $65 Billion. Amazon's 20% ownership would net Amazon in an unrealized gain, $13 Billion. Amazon received that 20% by investing $2 Billion into Rivian, thus Amazon's investment would be a 550% gain.
@Steven Fiorillo I loved the article. Just a brilliant write up!! Thank you!!
From the beginning, AMZN has never given one stinking rip about what "the street" thinks about what they were doing, their strategy, or how they were investing their money and they don't now. History shows how well this company has done and I suspect they will continue with their success. Agreed AMZN is still a very attractive long-term growth story and stock is a strong buy here. I am long AMZN.
Thank you for the clarification. I was happy with the Q3 results. The quarter was up against a tough comparable but overall they did well considering supply restraints, labor shortages, and increasing competition. I'm happy to keep on buying and holding.

Great things still to come from Amazon… Rivian investment alone will move the needle… oops gotta go …. Another package just showed up on my doorstep!
Dixie Hummer profile picture
This is one of the best articles ever written on Alpha. Amazon is all about the long game. Think of Amazon as a yo yo going up a flight of stairs. The yo yo goes up n down but the direction over the long run is up. The only thing that can “F up” Amazon is the federal govt. Think of Amazon as the company that’s doing everything that GE should have done but didn’t. Detractors are freaked out about Whole Foods, but they have no idea how Amazon uses that business as a data mining repository. Great article.
@Steven Fiorillo great article. Would you be able to comment on the milestone that AMZN achieved in Q3 which is for the first time in the company's history, service revenues exceeded product revenues? This tremendous achievement seems to be unrecognized by analyst and investors.
A “miss” means missing Wall St., not their own guidance. Shareholders, including myself, are getting tired of Amazon’s massive spending cycles that lead to large margin beat downs. It’s curious they had virtually zero growth y/y in retail sales in Q3 yet all this new spending is required.
Gary J is Rich on AMZN profile picture

"It’s curious they had virtually zero growth y/y in retail sales in Q3"

Pretty simple really - after Prime Day and before the holidays.
LasVegasInvestor profile picture
@dstb Traders are getting tired of large investments in future growth, long term investors like me love it. 40% of my portfolio is AMZN.
I am a long term investor and Amazon is also my largest holding. Disciplined companies can spend for growth and still maintain their margins and capital returns. Amazon clearly can’t do that. “Investing” is your word not mine.
AMZN is by far my largest holding because of its dominance and great industries. Unfortunately, without a dividend, shares are going to stay under pressure due to high PE and slowing growth rate. AMZN will earn its way through this over time but I fear no short term catalysts for the stock price. Its tough to be patient with so many inferior stocks out there trading at much higher multiples.
LasVegasInvestor profile picture
Bravo! Well said! Q4/Q1 may be a bit of slow down in growth ahead but after that management guided to return to historic growth numbers. This was the most important part of the earnings call.
BAHAMAS1 profile picture
Thanks for a good article and breakdown.

Steven Fiorillo profile picture
@BAHAMAS1 Thanks for reading and commenting. I appreciate it
It was hard to read. The author just sounds mad and defensive. The trends aren't good and I expect AMZN to trade below 3000 soon. Lucky the overall market trend is up and holding them up for now. But it wasn't really a great quarter. AWS is propping up the other parts. Capital spending might just be over doing it for a change. I think there is too much risk at this price. Sure gotta love the company long term. But it is probably dead money till March. I don't expect the 4th quarter to be great. AMZN's internal trends mixed with what I suspect will be a slowing economy in the 4th quarter could mean a bad 4th quarter.

The author misses the point. It isn't so much about what AMZN has done in the past. It is what are they about to do. And right now they are going to spend a whole lot of money and their main business isn't profitable. AWS is carrying them.
@johngonole great points there. If not for AWS, the entire business would be unprofitable. Let that sink in for a sec, $110bn quarterly revenue with nothing to the bottom line.
Yes, in very long term, this is a dominant business and eventually stock price will start moving up, but not until this spending spree is over IMO.
Gary J is Rich on AMZN profile picture
@nikolai.v510 AWS is part of the business. Let that sink in for a sec.
LasVegasInvestor profile picture
@nikolai.v510 They could slow the growth and be very profitable with all other parts but they build an extreme moat/monopoly and once all others are gone…boom.
waiting for 2400 or lower to buy since that seems like a safe entry price. This will go down with everything else soon enough, so better prices ahead.
@DigitalRobberBarons rational buy price, less than tesla market cap. Pretty interesting you feel 2400 is the number that would be $1.2T or less than 20x AWS run rate.......the rest of the co would be $0. You know a $32b rr ads biz, a $32b rr subs biz, and a $96b rr 3p biz + a $200b 1p commerce co

Whats your math on it?
Very good article on AMZN as it describes the way the company invests in the future, making use and investing in the digital technology driven businesses.
Investors should be aware that every business will be sooner or later be transformed and improved using the digital technologies.
AMZN will play an important role there, in my opinion, as a service provider for many industries.
Maybe people want to go shopping physically again!
Dear author,

It's true that Amazon didn't miss based on their own guidance. It is also true that Amazon is investing heavily in future projects.

However, Amazon is absolutely HUGE already. And their stock price reflects this. We may argue that, from a discounted future earnings model their stock price is fair, but the fact remains that not only Amazon but all the big tech firms have extreme valuations. Think about it. They made $4 a share for something worth $3384 as of today's close. That's 0.11 percent. I'm kind of sad that my dividend stocks are paying me an average of about 5% annually, but that's still 50 times more than Amazon is earning IN TOTAL even if they gave me, a shareholder, all of their earnings.

I know lots of people are going to come at me screaming about how naïve and stupid I am for thinking about PE ratio when what really matters is growth and blah blah blah. Yeah well I've been investing for decades and I'll stick to my own time-tested ways of assessing value, thanks.

Stop with the histrionics already. Just like Alphabet (GOOGL), AMZN dropped a few percentage points after hours and it's already moving towards where it closed the afternoon before earnings. I know some of you kids think the stock market should only go up forever but valuations really are getting stretched. We heard about how the Fed is tapering today (according to expectations, I know), and rate hikes are coming. We're going to reach targeted max employment next year according to the Fed and then as interest rates rise, I wonder how it's going to affect hyper growth stocks and their DCF models, hmmm? Amazon is growing at a measly 15% annually (they are HUGE now, future growth will be harder and harder), YES, ECOMMERCE GROWTH IS SLOWING, and headwinds are also materializing as cloud service competitors are also upping their game.

So, AMZN stock price is holding up really well despite growth deceleration and huge investments in projects that may or may not yield fruit. And I haven't really even gotten into regulatory risk from the government, or how the nation's attitude towards debt and inflation is about to explode in everyone's faces. Forget about individual Americans spending beyond their means, the federal government can't seem to balance their checkbook. Do you think a company whose main source of revenue is selling (and delivering for free) consumer goods is going to fare well in a "stagflation" environment? They are already struggling. And no, for consumer goods at least, inflation is not transitory.
Solojif1 profile picture
Amazon hasn’t fulfilled a single 2 day “prime” order to my house in over a year. Can’t remember last time I got 2 day shipping from amazon. Walmart and Target have been much better then Amazon. Not sure why I still pay $100 a year for prime membership?
s77nu profile picture
@Solojif1 really? I am now able to order certain items in the morning and get it delivered by 5 pm. I live downtown in a large city though. Do you live somewhere rural?
Skagit profile picture

Depends where one lives, what you order, and whether your neighborhood is serviced by Amazon's own delivery service or runs it through USPS/FedEx. We get next day on items stocked in the local fulfillment center (lots) and 2 day on things sent in from Reno. That is for Eastside Seattle.

A brother lives in dinkytown, WY and he may be a hundred miles or more from such a facility in a region where maintaining an Amazon fleet is impractical. On the other hand, he couldn't drive to where what he wants is available, so he's happy to get things quickly. Perspective.
s77nu profile picture
@Skagit Yep, understand the concept. My only question for @Solojif1 was where he/she lived, because not fulfilling any 2-day order in Prime for over a year sounds highly, highly unusual.
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