Stock Market Cafe
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
No Result
View All Result
Stock Market Cafe
No Result
View All Result
Home Trading News

Amazon was the worst-performing FAANG stock of 2021 — here’s why

by
January 5, 2022
in Trading News
0
0
SHARES
0
VIEWS
Share on FacebookShare on Twitter

RELATED POSTS

The second-half is ‘not looking good’: Strategists on how to weather the market storm

Tesla Pauses Plants After Ending Shaky Quarter With a Production Milestone

In this article

AMZN

Photographer: Thorsten Wagner/Bloomberg via Getty Images
Bloomberg | Bloomberg | Getty Images

Amazon shares finished 2021 as the biggest laggard among the mega-cap technology names, but there’s reason to believe 2022 could be a brighter year for the stock.

Shares of Amazon rose a measly 2.4% in 2021, vastly underperforming the four other so-called FAANG stocks. Apple gained 34%, Meta Platforms (formerly Facebook) saw its shares rise 23%, Netflix increased 11% and Alphabet, the year’s top tech stock, climbed 65%. At the same time, fellow tech giant Microsoft was up 51% for the year and the tech-heavy Nasdaq Composite gained 21% .

The last time Amazon delivered such lousy returns for investors was 2014, when the stock slumped 22%.

Several factors lie behind Amazon’s poor stock performance last year, according to analysts.

Amazon, like other e-commerce companies, faced tough year-over-year comparisons to 2020, when the coronavirus pandemic led to a surge in online orders.

Consumers cut their trips to physical stores in order to avoid exposure to the virus and flocked to online retailers for everything from toilet paper and face masks to office furniture and dumbbells. The shift to online shopping boosted sales for Amazon, eBay, Etsy, Wayfair and others, benefiting their growth rates and lifting their stock prices.

Amazon’s profits tripled year over year beginning in the second quarter of 2020, the first period to reflect the pandemic-fueled bump in business, and in the three consecutive quarters.

By spring of 2021, as a growing number of Americans got Covid-19 vaccinations, consumers began returning to stores and shifted some of their spending to pre-pandemic habits like travel and dining out.

Even though online shopping remained robust, Amazon saw its impressive year-over-year growth rates begin to fade. In the second quarter of 2021, Amazon’s revenue grew by 27%, which was a significant slowdown from the year-ago period, when sales skyrocketed 41%.

Amazon underperformed expectations in its last two earnings reports, which also weighed on the stock, said Tom Forte, senior research analyst at D.A. Davidson, in an interview.

Amazon’s other key businesses, cloud computing and advertising, had a “very good year” in 2021, but that didn’t overshadow the poor performance of Amazon’s core retail division, said Forte, who has a buy rating on Amazon’s stock and a price target of $3,900 per share.

“If you look at 2021 as a standalone, it shows that doing well in cloud and advertising is not enough on its own,” he added.

Investor concerns around rising costs in Amazon’s core retail business may have also contributed to the stock’s underperformance, Forte said.

Amazon had warned Wall Street for much of 2020 and 2021 that it would spend billions of dollars on coronavirus-related costs, like safety measures for front-line workers and growing its physical network to keep up with demand.

Then, just as Covid-related costs began to temper last year, Amazon and other major corporations were hit with global supply chain constraints and labor challenges. CEO Andy Jassy said Amazon would take on “several billion dollars” of extra costs in the fourth quarter of 2021 to address those issues.

Amazon raised wages and offered bonuses to attract workers in the tight labor market. Facing inconsistent staffing levels in some warehouses, Amazon had to reroute packages over longer and sometimes costlier distances to facilities with enough staff on hand to process orders.

“We all knew that there were expenses associated with Covid-19, but it was a surprise to me when I realized that they were having a labor challenge,” Forte said. “It was a negative surprise and I do think it affected how the stock performed.”

Looking ahead

After a lackluster 2021, Amazon’s stock may have an easier time this year.

The company will face easier year-over-year comparisons after growth moderated in 2021, said Guggenheim analyst Seth Sigman. Amazon may also start to reap the benefits of some of its pandemic-related investments in supply chain and logistics over the last two years, Sigman said.

“Our expectation is that growth should reaccelerate in 2022 after the moderation we saw in the last few quarters,” said Sigman, who has a buy rating and a $4,300 price target on Amazon shares.

There are multiple hangovers from last year that could still weigh on Amazon’s stock in 2021, like inflationary pressures, supply chain constraints and labor challenges, Forte said.

Still, several analysts have named Amazon as a top pick for the year, including Jefferies, Bank of America Global Research, RBC Capital Markets and Goldman Sachs, citing expectations for a rebound in its ecommerce business.

WATCH: Amazon is our top tech pick for 2022, says Jefferies’ Brent Thill

ShareTweetPin

Related Posts

The second-half is ‘not looking good’: Strategists on how to weather the market storm

by
July 5, 2022
0

A trader works on the floor of the New York Stock Exchange (NYSE), June 27, 2022. Brendan McDermid | Reuters...

Tesla Pauses Plants After Ending Shaky Quarter With a Production Milestone

by
July 5, 2022
0

Bloomberg US Recession Isn’t Goldman’s Base Case, Macro Strategist Says (Bloomberg) -- The base-case expectation isn’t for a recession in...

South Korea stocks lead broad gains in Asia; Reserve Bank of Australia hikes rates as expected

by
July 5, 2022
0

SINGAPORE -- Shares in the Asia-Pacific mostly traded higher as investors look ahead to the Reserve Bank of Australia's rate...

Stock futures rise after another losing week on Wall Street

by
July 5, 2022
0

Traders on the floor of the NYSE, July 1, 2022. Source: NYSE Stock futures inched higher in overnight trading after...

European stocks head for higher open as global markets look for gains after rout

by
July 5, 2022
0

LONDON -- European stocks are expected to open higher on Tuesday as global markets look to cement gains after a...

Next Post

Fourth stimulus checks not expected as federal government grapples with omicron surge

Walmart cuts paid Covid leave in half, as CDC isolation guidance changes

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

email

Get the daily email about stock.

Please Enter Your Email Address:

By opting in you agree to our Privacy Policy. You also agree to receive emails from us and our affiliates. Remember that you can opt-out any time, we hate spam too!

MOST VIEWED

  • Crocs sees fourth-quarter sales up 42%, CEO Andrew Rees says 2021 was ‘exceptional year’

    0 shares
    Share 0 Tweet 0
  • Buying a car from the factory sounds expensive, but it can actually save you money. Here’s how to do it.

    0 shares
    Share 0 Tweet 0
  • Roth TSP vs. Roth IRA: How Do They Compare?

    0 shares
    Share 0 Tweet 0
  • The states that won’t tax military retirement in 2022

    0 shares
    Share 0 Tweet 0
  • Allbirds stock has plunged 50% in two months, now one top analyst says buy it

    0 shares
    Share 0 Tweet 0
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
All rights reserved by www.stockmarket-cafe.com
No Result
View All Result
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy

All rights reserved by www.stockmarket-cafe.com