Beware Amazon Investors! Why AMZN Stock Has Room to Fall.

Stocks to sell

Amazon (NASDAQ:AMZN) isn’t the perfect business that some perma-bulls might have assumed it would be. The company’s results with its grocery and convenience stores, as well as with its voice assistant Alexa, have been underwhelming. Since AMZN stock flew very high for a decade or longer, on the presumption that Amazon is infallible, a prolonged pullback may be coming.

Hyper-growth stocks do well during bull markets, but can fall fast when the bears assert themselves. That’s when investors discover that no company is perfect, and no stock can just go up forever.

Amazon’s glory days might be in the rear-view mirror now. The company will not go bankrupt next week or anything like that. Yet, an investment in Amazon now could end up being “dead money” for a long time.

AMZN Stock Looks Uncertain

Value-focused investors should consider that, after factoring in all share splits, AMZN stock shot up from $10 in 2011 to $185 in 2021. It’s awfully difficult to sustain, or even justify, share-price appreciation of that magnitude.

As the old saying goes, the bigger they are, the harder they fall. After such a massive rally, the Amazon share price could decline much further than it already has. The company’s disappointing fourth-quarter and full-year 2022 financial results reinforced the notion that Amazon is past its prime.

During a time when machine learning is a red-hot market segment, Amazon’s voice assistant has frustrated some customers. Carolina Milanesi, president of market research group Creative Strategies, observed that Alexa doesn’t always properly do the jobs that people ask it to do.

“Our patience is limited, you get annoyed,” Milanesi remarked. Meanwhile, independent tech analyst Benedict Evans observed that many users only view Alexa as a “glorified clock radio.”

Amazon’s Underwhelms with Forays into Grocery and Convenience Stores

Amazon isn’t known for staying in its lane. Cracks in the foundation are showing as Amazon’s ventures into grocery and convenience stores have been problematic.

During 2022’s fourth quarter, Amazon incurred a whopping $720 million impairment charge as the company closed some of its grocery stores (known as Fresh). Amazon temporarily halted the expansion of the company’s Fresh stores and closed down some of its Go convenience stores. More recently, Amazon announced that it’s closing eight Go convenience stores across several big cities.

It looks like Amazon can’t accept or even acknowledge its shortcomings. Amazon spokesperson Jessica Martin insists that the company remains “committed to the Amazon Go format,” while CEO Andy Jassy has, according to the Financial Times, actually “vowed to double down on the company’s struggling grocery store business.”

What You Can Do Now

If Amazon’s management won’t acknowledge their missteps, the company could cease to offer value to its shareholders. Again, Amazon won’t go bankrupt tomorrow or next week, but the company may be in a prolonged period of decline.

Therefore, this is not an ideal time to consider a position in AMZN stock. Indeed, it’s not a terrible idea for Amazon’s investors to book some profits if they can. After all, profits can disappear quickly when a company like Amazon doubles down on its ill-conceived business ventures.

On the date of publication, Louis Navellier had a long position in AMZN. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

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