What Happened?
Shares of cloud computing and online retail behemoth Amazon (NASDAQ:AMZN) fell 3.3% in the afternoon session as markets remained anxious about the negative impact of tariffs, with concerns intensifying following new updates from the Trump administration. Treasury Secretary Scott Bessent noted on CNBC, "We're focused on the real economy.... I'm not concerned about a little bit of volatility over three weeks." Adding to the concerns, President Trump announced on Truth Social that his administration was considering imposing a 200% tariff on all alcoholic beverages imported from European Union countries. This move was in response to the EU's 50% tariff on whisky. Trump added, "This will be great for the Wine and Champagne businesses in the U.S."
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Amazon? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Amazon’s shares are extremely volatile and have had 32 moves greater than 2.5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock gained 7.6% on the news that the company reported impressive third-quarter earnings. Amazon blew past analysts' EPS and operating income expectations during the quarter, giving credence to the argument that the company can be much more profitable and high margin going forward. Operating profit guidance for next quarter also came in ahead.
Taking a closer look at the operating segments, AWS (Amazon Web Services), grew 19% year on year, in line with analysts' estimates, while operating margin beat handily. Notably, AWS reached a revenue run rate of $110 billion amid growing demand for cloud and AI services. Advertising revenue, which is a promising growth driver, also exceeded Wall Street's expectations. AMZN noted that the advertising business recorded strong margin expansion, helping to make sense of the improvements in profitability recorded in the quarter.
It wasn't a perfect quarter, as revenue guidance for the next quarter was underwhelming. Given the excitement around margins, though, the market overlooked the revenue guidance shortfall. Overall, we think this was a very good quarter showing that there might need to be more bullishness around Amazon's long-term margin structure.
Amazon is down 12.1% since the beginning of the year, and at $193.58 per share, it is trading 20% below its 52-week high of $242.06 from February 2025. Investors who bought $1,000 worth of Amazon’s shares 5 years ago would now be looking at an investment worth $2,170.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.
