Disappointing earnings put Amazon.com shares on track for its worst day since October 2011 on Friday—but to one Wall Street analyst, the stock is struggling because investors are simply fed up with the Internet retailer’s lack of revenue growth.
“This still is a large e-commerce company at its core and one that continues to take gross profit and invest it back in the business to grow,” Eric Sheridan, an analyst at UBS, told CNBC. “So what investors want to see is that gross margin dollar reinvested back in the business yield a higher rate of growth, and I think that’s what’s giving people pause today.”
Amazon blamed its larger-than-expected second-quarter loss on its grand investments. It will spend more than $100 million on original video content in the third quarter, for example, considerably higher than its spending a year ago and in the second quarter, the company said.
To Sheridan, though, investors are tired of waiting for a return on that investment.
“Frankly, [there] are a lot of Internet stocks that trade at much healthier multiples than Amazon does that are growing revenues 20 percent plus,” he said on “Squawk on the Street.”
Amazon delivered a Q2 loss of 27 cents a share on Thursday, sharply missing expectations for a loss of 15 cents a share. The company posted sales of $19.34 billion, matching forecasts.
The online retailer’s first smartphone, the Fire phone, becomes available Friday.