Amazon share price forecast after Q3 results

Amazon.com, Inc. (NASDAQ: AMZN) reported third-quarter results on Thursday, and the company’s management updated financial guidance for the fourth fiscal quarter.

Third-quarter results missed estimates, while the e-commerce giant’s forecast for the holiday sales growth showed many of the concerns that drove the huge sell-off.

Amazon reported third-quarter results on Thursday after the market closed; total revenue has increased by 14.7% Y/Y to $127.1 billion, which was less than expected, while the earnings per share were $0.28 (beats by $0.07).

It is important to say that for the first nine months of 2022, Amazon has recorded a $3 billion loss as compared to $19.04 billion in net income recorded in the prior year period.

The company’s management updated financial guidance for the fourth fiscal quarter and reported that total revenue for the fourth fiscal quarter should be between $140 billion and $148 billion vs. a consensus of $155.37 billion.

This guidance indicates a year-over-year growth rate of only 2-8%, and Amazon’s growth is clearly expected to slow even more in the upcoming quarters.

Growth rates in the double-digits are likely a thing of the past, and we could see continual pressure on Amazon’s consolidated operating margins due to a loss-making e-Commerce business, as well as a strong US dollar. CEO Andy Jassy said:

The company’s conservative outlook upset investors, and shares of Amazon fell more than 20% in after-hours trading on Thursday. Given the poor outlook for the next quarter and high losses in the first nine months of the 2022 year, the stock’s risk profile remains unattractive.

I believe the valuation will see further pressure in the near term and going forward; high inflation will continue to weigh on consumer spending, which Amazon, as one of the world’s largest e-Commerce companies, remains vulnerable to.

Now let’s take a look at fundamentals. With a market capitalization of $1.05 trillion, Amazon is not undervalued and compared to Alibaba Group Holding Ltd (NYSE: BABA), Amazon is more expensive on a price-to-sales basis.

According price-to-sales ratio (market capitalization/revenues), Amazon shares are trading at 2.2, which is nearly two times higher than the price-to-sales ratio of Alibaba, which is trading at a P/S of 1.3.

It is also important to mention that JD.com, Inc. (NASDAQ: JD) trades at less than one this year’s sales, and buying the “dip” in the case of Amazon could be a mistake in the near term.

Amazon shares have weakened from $146.57 to $97.66 since August 16, 2022, and the current price stands at $103.41. The price has also moved below the 10-day moving average, indicating that the bottom is still not reached.

The strong support level stands at $100, while $140 represents the first resistance level. If the price falls again below $100, it would be a “sell” signal, and we have the open way to $90 or even below. Conversely, if the price jumps above $130, the next target could be resistance at $150.

Amazon reported third-quarter results that missed estimates, and the company’s management updated financial guidance for the fourth fiscal quarter, which indicates a year-over-year growth rate of only 2-8%. I believe the valuation will see further pressure in the near term and going forward; high inflation will continue to weigh on consumer spending, which Amazon, as one of the world’s largest e-Commerce companies, remains vulnerable to.

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