Shares of Amazon.com Inc fell 10 per cent in trading before the bell on Friday after its sales outlook missed Wall Street targets, fanning concerns that the online retailer's expansion may finally be losing steam.
The third quarter results late on Thursday was the second time running that billionaire Jeff Bezos' firm had fallen short of Wall Street's lofty sales targets, and the numbers sent a shockwave reverberating through global stock markets.
The fall in shares, if replicated when U.S. stock markets open officially, would knock nearly $90 billion off Amazon's market value and relegate it behind Microsoft Corp and Apple Inc in terms of market value.
There were no rating downgrades, however, from the Wall Street analysts who have almost universally backed the company's long-term prospects.
Only three brokerages cut their price targets on the stock and four others raised their targets, saying Amazon's long-term growth story remained intact.
"Shares are up 52 per cent YTD, hence this kind of 'growth scare' is likely to weigh on sentiment in the near term, but ultimately will work itself out (likely by 1Q19)," Barclays analyst Ross Sandler wrote in a client note.
The world's largest retailer is facing hurdles to boost sales in international markets as well as increased competition at home from the likes of Best Buy, Target Corp and Walmart Inc, who are stepping up digital investments.
Revenue from Amazon's international business, which brings in 27.5 per cent of total sales, rose 13.4 per cent in the third quarter, missing estimates, and decelerating from a 27 per cent year-on-year expansion in the previous quarter.
"We don't see any real structural issue with Amazon but nearly every line in the business is decelerating a tad, and we typically see another deceleration in retail in 4Q, hence are struggling to identify a catalyst," Sandler said.
Amazon expected sales in the holiday quarter leading up to Christmas to rise between 10 per cent and 20 per cent, or up to $72.5 billion, while analysts were expecting $73.9 billion, according to Refinitiv data.
Its operating profit forecast of between $2.1 billion and $3.6 billion also came in below consensus estimates.
Several analysts called the company's outlook conservative and said any outright dip in profit seems highly unlikely.
"Overall, Amazon's growth trajectory remains solid, including advertising, grocery, pharmacy, and speciality retail, as well as Amazon Business ($10 billion in sales in eight countries) and Amazon Web Services," Telsey Advisory Group analysts said.
Shares of the company were down 9.7 per cent at $1,610 in trading before the bell.