2023-04-19 07:30:00 ET
Trading for $102 a share, Amazon (NASDAQ: AMZN) stock is down substantially from its all-time high of $186, reached in late 2021. Its shares tumbled amid rising interest rates and eroding margins in the e-commerce and cloud computing businesses. But these headwinds look temporary, and Amazon may be on the cusp of recovery. Let's dig deeper.
While e-commerce has carried Amazon for the last two decades, its cloud computing business, Amazon Web Services (AWS), is arguably the bigger story right now. While AWS represents less than 20% of Amazon's revenue, it generates the majority of operating profits. So when growth and margins in this crucial segment began to slow, investors reacted by dumping Amazon stock, leading to a substantial crash in 2022.
The business is struggling because of macroeconomic uncertainty. First and foremost, inflation is eroding consumer purchasing power for AWS clients, who are now looking to save money by switching to lower-priced service tiers. Rising interest rates are putting even more pressure on these companies.
For further details see:
3 Reasons Buying Amazon Stock Could Be a Genius Move