Amazon (AMZN:NSD) has seen a significant decline in its stock over the past year, falling 40% from its highs. The stock was recently down more than 50% from its high.
The pandemic had a significant impact on the company’s performance, as the boom in online shopping and financial stimulus during the pandemic initially boosted sales and investor sentiment.
However, the pandemic also brought about several headwinds for Amazon such as bottlenecks at ports causing logistical headaches and increased costs, a tight labor market that necessitated signing bonuses and wage increases, inflation and rock-bottom consumer sentiment weighing on margins and a strong US dollar (DXY) which crushed international profits.
All these challenges added billions in costs and sent two of Amazon’s three segments into the red. However, there is a significant trend that should be discussed more, Service sales overtook product sales for the first time ever in the trailing twelve months (TTMs) from Q3 2022.
Service sales include AWS, advertising, subscriptions (like Prime), and third-party seller services, and they are more profitable, predictable and consistent. Long-term investors should look to service-based margins like Microsoft’s (MSFT:NSD) as a model, where profitability is terrific and investors can count on consistent results.
Amazon has faced several challenges during the pandemic, leading to negative perceptions of the company and a decline in its stock. It’s important to stay informed and ahead of potential developments in the future.