ETFs To Watch On Amazon.com, Inc.’s Stock Drop

amazonThe online e-commerce behemoth Amazon (NASDAQ:AMZN) reported sluggish Q2 results after the market closed on Thursday. The company is investing heavily in new distribution warehouses and gadgets to expand and improve its service offerings that continued to weigh on the bottom line despite revenue growth. Additionally, weaker-than-expected growth in cloud-computing business, one of its most promising businesses, took a toll on profitability.

Amazon Results in Detail

Amazon reported a huge loss of 27 cents per share, much wider than the Zacks Consensus Estimate loss of 13 cents and down from year-ago earnings of 2 cents per share. Revenues climbed 23% year over year to $19.34 billion, surpassing the Zacks Consensus Estimate of $19.325 billion.

The year 2014 has so far been eventful for Amazon as it rolled out a number of new products including a hand-held grocery-ordering device, TV streaming box, unlimited e-book subscription service, a music-streaming service and the new Fire smartphone. The company will continue to invest in new business offerings in the coming months to boost its competitive advantage over major tech rivals such as Apple (AAPL), Google (GOOG) and Netflix (NFLX).

For the current quarter, the company projects 15–26% revenue growth to $19.7 billion to $21.5 billion, much higher than our current estimate of $19.330 billion. It also expects an operating loss between $410 million and $810 million in the third quarter compared with loss of $25 million in the same period last year.

Following the disappointing earnings, shares of AMZN tumbled as much as 11.5% in aftermarket hours. The earnings miss was not solely responsible for pushing the shares down, the possibility of another big loss in the third quarter compelled investors to flee from the stock. Investors have turned increasingly cautious about betting on the company’s long-term growth potential at the expense of little to no profit.

Moreover, Amazon has a Zacks Rank #5 (Strong Sell) and a poor industry Rank (in the bottom 18%) at the time of writing as per the Zacks Industry Rank, suggesting that more pain could be in store for it in the near term (see: all the Technology ETFs here).

ETFs to Watch

Given the sluggish after-market trading in the stock and weak short-term growth outlook, investors may want to take a closer look at some ETFs having higher allocation to this Internet giant. For those, we have highlighted three funds that would be in focus in the coming days.

Market Vectors Retail ETF (NYSEARCA:RTH)

This fund provides exposure to the 26 largest retail firms by tracking the Market Vectors U.S. Listed Retail 25 Index. Of these, AMZN takes the second spot at 9.48%. The ETF has a certain tilt toward specialty retail, which accounts for 29% share while hypermarkets (16%), department stores (12%) and drug stores (12%) round off to the next three spots.

Pages: 1 2

Leave a Reply

Your email address will not be published. Required fields are marked *