It Is Official Amazon Is Now A Slowing Growth Story, Plus More

Stocks posted a solid day rising by nearly 90 basis points on the S&P 500 and more importantly it crossed 2,700. It sets up a run in the index between 2,800 to 2,830. Below is the chart I posted over the weekend; we can see the S&P 500 is continuing right along the path we laid out.

S&P 500, spx

Russell 2000 (IWM)

The Russell confirmed the breakout and it appears to be on a path higher to around 1,562.

russell 2000,

Housing (HGX)

The housing sector broke out as well, and appears to be on its way back to 295.

housing, hgx

Chips (SMH)

Semiconductor too.

smh

We could go on and on with sector that breaking out because the market is breaking out — period. Well, maybe not the banks.

Hard to deny at this point — right?

Amazon (AMZN)

Amazon reported results tonight, and it seems to be a trend for them lately to disappoint investors with guidance. It is the second quarter in row guidance that was below expectations if I remember correctly.  Looking through the numbers Amazon has become a slowing growth story. Sorry. Look…

I know some people will say, I’m crazy because they have a segment like AWS growing at 46%. But North America y/y sales slowed to 18% this quarter. Just look at the trend below that is highlighted for y/y growth.  Q1 46%, Q2 44% Q3 35% Q4 18% – Slowing growth

amazon, amzn

Even international sales have slowed from 20%+ growth to upper teens. AWS growth although consistent is no longer seeing accelerating growth and has signs of slowing ahead.

amazon, amzn

But look facts are facts, the company is maturing, and the bigger the revenue gets, the harder it is to grow –its calls the law of large numbers.   This isn’t a bad thing nor am I saying that Amazon is doomed. No, it’s not doomed, but as companies mature and growth slows, the valuation has to come down to adjust for that slowing growth. There are now pretty clear signs that Amazon’s growth is maturing.

The fact that Amazon has now disappointed on guidance two quarters in a row would suggest to me that investors are expecting faster growth out of the company. But the company can no longer grow at the pace investors would like.  It is part of the reason the stock is down 5% tonight, trading at $1,635.

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Disclaimer: This article is my opinion and expresses my views. Those views can change at a moment's notice when the market changes. I am not right all the time and I do not expect to be. I ...

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