Amazon market value slips below $1tn on bleak outlook

Amazon's market value briefly fell below $1 trillion after its earnings report and outlook disappointed investors.

The stock fell as much as 12 per cent on Friday after the e-commerce company projected the slowest holiday-quarter growth in its history, while sales at its web services business missed estimates.

That sent Amazon’s market value down to about $995 billion before the stock rebounded and closed 6.8 per cent lower. The stock fell as much as 21 per cent in after-hours trading on Thursday. Amazon is joining a long list of US companies whose market valuations crumbled in this year’s bear market. “It [stock sell-off] looks like an overreaction to us after a difficult earnings week for the group,” Piper Sandler analyst Thomas Champion wrote in a note.

While the macro environment remains challenging, especially in Europe, the company’s forecast “looks conservative”.

The ranks of companies with valuations in excess of $1tn have thinned this year, with soaring US Treasury rates and the highest inflation in decades weighing heavily on the stocks of technology companies.

The Nasdaq 100 has fallen 29 per cent from last year’s peak amid rising risks to economic growth from supply problems and coronavirus lockdowns in China to the war in Ukraine.

The market value of electric car maker Tesla, once worth more than $1.2tn, tumbled to about $720bn. Facebook parent Meta Platforms' market value plunged by more than 75 per cent from its $1.08tn peak last year, forcing it out from the ranks of the world’s 20 largest companies.

Apple, whose huge cash flows and strong balance sheet have made it a favourite destination for risk-averse investors, briefly lost its title as the most valuable company in the world to oil company Saudi Aramco.

The pandemic had helped supercharge Amazon’s businesses and propelled its value to a $1.88tn peak about a year ago.

With growth now slowing and an uncertain macroeconomic backdrop, its shares have fallen by about 38 per cent this year. Jeff Bezos, once the richest person in the world, was ranked third as of Thursday.

“Amazon could trade range-bound until there is evidence of the macro storm clearing and a sustainable improvement in profitability,” said Brent Thill, an analyst at Jefferies, who has a buy rating on the stock and a price target of $135.