Amazon sees $60 billion in market cap erased after quarterly profits shrink
- Amazon reported first-quarter earnings Thursday that missed analyst expectations.
- Shares fell 5% in early trading, erasing $60 billion in market value from the tech giant.
- While revenue jumped because of the coronavirus pandemic, costs rose as well.
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Amazon shares are tumbling following the tech giant's first quarter earnings release, which fell short of analyst expectations even as revenue got a coronavirus-induced boost.
Shares opened nearly 5% lower early Friday at $2,354, erasing more than $60 billion in market capitalization from the company.
The move lower comes after the company's disappointing first quarter earnings after market close Thursday. Amazon's revenue surged 26% in the first quarter, beating expectations of a 24% jump, boosted by the coronavirus crisis as people flocked to the site to order items for delivery instead of shopping in-person and risking the virus.
But earnings took a hit, coming in at $5.01 per share versus expectations of $6.27 per share. The outbreak has caused uncertainty for the company, leading to higher expenses.
It costs more for Amazon to have an uptick in traffic on the site, and the company has also had to spend more due to disrupted supply chains. In addition, Amazon has had to make safety upgrades to warehouses amid the crisis, adding to costs.
Amazon CEO Jeff Bezos said Thursday that the company expects to spend all of its projected second-quarter profits on COVID-19 related expenses.
"If you're a shareowner in Amazon, you may want to take a seat, because we're not thinking small," Bezos said in a statement.
He continued: "Under normal circumstances, in this coming Q2, we'd expect to make some $4 billion or more in operating profit. But these aren't normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe."
That means that operating income would be in the range of $1.5 billion to a loss of $1.5 billion in the second quarter, down from last year's $3.1 billion, according to the company.
Amazon has outperformed the broader market this year, up 34% to date through Thursday's close. The S&P 500 is down 11% in the same time period.
