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Amazon Q1 Earnings: Free Cash Kept Deteriorating

May 02, 2022 5:58 AM ETAmazon.com, Inc. (AMZN)19 Comments


  • After reporting its Q1 earnings, Amazon's share price fell 14% on Friday, the biggest one-day drop since July 2006.
  • It reported an unexpected loss in the first quarter and revenue growth was the worst since the dot-com bubble burst in 2001.
  • In particular, its free cash kept deteriorating, especially after accounting for its lease obligations.
  • AWS is a bright spot, posting 57% YoY growth in profits and announcing a landmark agreement with Nasdaq.
  • However, even after the large price correction, the stock is still valued at a substantial premium given its current fundamentals.
  • Looking for a helping hand in the market? Members of Envision Early Retirement get exclusive ideas and guidance to navigate any climate. Learn More »

Amazon Prime Home Delivery Robot Navigating Sidewalk

Cindy Shebley/iStock Editorial via Getty Images


Amazon.com (NASDAQ:AMZN) was caught in a perfect storm last Friday after its 2022 Q1 earnings report. Its shares fell 14%, the biggest one-day drop since July 2006, after the earnings. On monthly basis, it plunged

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Envision Research, aka Lucas Ma, has over 15+ years of investment experience and holds a Masters with in Quantitative Investment and a PhD in Mechanical Engineering with a focus on renewable energy, both from Stanford University. He also has 30+ years of hands-on experience in high-tech R&D and consulting, housing sector, credit sector, and actual portfolio management.

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Comments (19)

EliasMouawad profile picture
Nice article. BABA has bigger upside potential.
Yes Amazon is slowing. Actually, all FAANG stocks are slowing at the same time even though they're in totally different sectors (FB - social media, Amazon - cloud + retail, Apple - mobile phones, Netflix - streaming, Google - search).

Or maybe Mr. Market is just a bit depressed about tech and analysts can't see further than their nose because they are comparing numbers to last year which was exceptionally strong due to Covid. And just maybe growth will be back to normal in 1-2 years!
No Guilt profile picture

Or maybe money is being sucked out of the system, with much more to come?
First off, thank you for such a quick follow up article.

Reference your previous work as well. If they'd re still attaining 30% MROCE couldn't the massive investing of FCF be a good thing? How does this effect their owner earnings?

I think your leasing obligations remarks are in regards to equipment for AWS. From my understanding, it's kinda sticky in that once you get a customer they usually stick around. So I would think any expenditures to fuel AWS 30%-50% growth with high retention rate would be a good thing even for the near term painfully high capex. Even if capex never drops, with margins of 30%, I would be interested in getting every drop of growth I can too.

As for other losses, they just hiked prime subscriptions $20, so i would think that will help offset some cost.
If we hit a recession and spending slows, prime subscriptions have become almost a staple with video included and football contracts. So I think maybe it could insulate the downside a little?

I'm very torn. Its hard to argue against Amazon long term but also hard to justify valuations short term even at 2400.
I own a lot higher then that. I'm also torn about selling and just buying back in 31+ days and tax loss harvesting.

Leaving towards the latter because it's easy enough to find a heavy weighted AMZN ETF in the mean time or another stock that has better opportunity and momentum. I'm definitely not afraid to say whoops and don't need to hold to "get back to even" or anything like that

That's my (.02) I'd love anyone else's productive thoughts, including the author.
Hopefully if u made it to the end u got the 2 cent (loss) joke. Since I'm down like 15% in this one.
Gary J is Rich on AMZN profile picture
@Jim Uechi

Right, you are talking about marker timing guessing.
sgt.red.blue.red profile picture
What happened to cause the 2006 big selloff? I googled to no quick avail.
Gary J is Rich on AMZN profile picture

Maybe because it was 2007.
Gary J is Rich on AMZN profile picture

The "big selloff" was 2007 not "one day". Those of us that got rich on AMZN do not care about one day,
Gary J is Rich on AMZN profile picture
No mention of the $10B AWS DOD win. Major Fail.
Hudson Investments profile picture
Warren Buffett will get his opportunity to take a massive position in AMZN.
Scobie profile picture
@ArnieW That's a laugh. Not at this ridiculously overvalued price.
Gary J is Rich on AMZN profile picture

Don't look now but he is already in AMZN. Keep your day job.
Hudson Investments profile picture
@Scobie Buffett just bought $600M AAPL but not AMZN. It’s actually a business with a moat and at value pricing.
Hudson Investments profile picture
Don’t take Bezos and Jassy for dummies. They will turn the ship around.
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