Amazon CEO Jeff Bezos towers the facility at the grand opening of Amazon Spheres, in Seattle, Washington January 29, 2018.
Jason Redmond | Getty
Barclays told customers that it is "still early" to buy a dip on Amazon, as the e-commerce giant's heavy investment period could further damage the economy and its stock before things get better.
"Historically, it is a good idea to buy AMZN shares in the 7th-8th round of the investment cycles, closer to where we are coming from, but unfortunately it feels like we are only in the 3rd-4th round. , "Barclays Internet analyst Ross Sandler said in a note to clients on Friday.
Shares of Jeff Bezos-led Amazon fell after the company reported third-quarter earnings falling below Wall Street expectations, as a return to a heavy investment cycle cut into the e-commerce giant's profitability. Amazon spent over $ 800 million to invest in faster delivery in recent quarters, with net revenue falling to $ 2.1 billion, down 26% from the previous year for $ 2.9 billion.
"The one-day pressures drive up costs and create stress throughout the system from outbound shipping, inventory management, fulfillment and staffing, marketing, etc., all of which should continue until mid-2020," Sandler said.
AWS became another overhang. The cloud business reported $ 9 billion in quarterly sales, falling slightly below analysts' expectations of $ 9.1 billion. Operating revenues were $ 2.26 billion, up 9% from the same period last year, but below the $ 2.55 billion FactSet estimate. For the past four years, AWS has been the bulk of Amazon's operating revenues, with declining growth highlighting "the shift to enterprise contracts and longer term contracts," Sandler said.
Although Amazon hit Street in its third-quarter revenue, Amazon's fourth-quarter revenue guidance in the range of $ 80.0 billion and $ 86.5 billion, well below the street's average estimate of $ 87.4 billion, indicating that the slow growth can continue.
Unlike Sandler, almost every other Wall Street analyst recommended buying the dip on Friday. UBS said it considers "any share of weakness after the quarter as a good starting point."
But Barclays is ultimately bullish on Amazon. The company has a buy rating of the stock and a price target of $ 2000 per share, which is lowered from $ 2,180 per share.
Shares of Amazon are down 6% in premarket trading on Friday.
—with reporting from CNBC's Michael Bloom.