Amazon Is the Worst Dow Stock After Earnings. Here's Why

Amazon Prime branded packaging boxes — (Image credit: Leon Neal/Getty)

Amazon.com (AMZN) is the worst Dow Jones stock Friday as the world's largest e-commerce company's weak first-quarter guidance offsets a top- and bottom-line fourth-quarter beat.

In the three months ending December 31, Amazon's revenue increased 10% year over year to $187.8 billion. Its earnings per share (EPS) surged 86% from the year-ago period to $1.86.

"The holiday shopping season was the most successful yet for Amazon and we appreciate the support of our customers, selling partners, and employees who helped make it so," said Amazon CEO Andy Jassy.

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The results beat analysts' expectations. Wall Street was anticipating revenue of $187.3 billion and earnings of $1.49 per share, according to CNBC.

Amazon also said that revenue from its Amazon Web Services (AWS) cloud segment increased 18.9% to $28.8 billion and advertising revenues were up 18% from year-ago period to $17.3 billion.

Analysts were anticipating AWS revenue of $28.8 billion and advertising revenue of $17.4 billion.

"Probably the biggest number for investors was growth in AWS ... [which grew] right in line with the analysts," says Stephen Callahan, trading behavior specialist at Firstrade. "Compare that to Alphabet (GOOGL) and Microsoft (MSFT), which both saw growth decelerate in their cloud divisions. This means Amazon is winning more AI [artificial intelligence] business than its competitors and has regained the leadership position in AI."

For its first quarter, Amazon said it expects to achieve revenue in the range of $151 billion to $155.5 billion, representing growth of 5% to 9% from the year-ago period. The midpoint of this range, $153.25 billion, came up short of the $158.8 billion in revenue analysts were calling for.

"Amazon's guidance for the first quarter was weaker than expected because it forecast a big forex hit," Callahan adds. "This will be an issue going forward."

Is Amazon stock a buy, sell or hold?

Amazon has put in a strong performance on the price charts over the past 12 months, up 36% vs the S&P 500's 22% return. And Wall Street thinks the Magnificent 7 stock has even more room to run.

According to S&P Global Market Intelligence, the average analyst target price for AMZN stock is $258.03, representing implied upside of more than 12% to current levels. Additionally, the consensus recommendation is a Strong Buy.

Financial services firm Wedbush reiterated its Outperform rating (equivalent to a Buy) and $280 price target on the consumer discretionary stock after the earnings release.

"Amazon reported healthy Q4 results with operating income roughly 11% above consensus," says Wedbush analyst Scott Devitt. He adds that possible catalysts for AMZN in the intermediate term include AI-driven AWS growth, automation gains, Alexa AI commercialization, Project Kuiper monetization and a potential Prime price hike. Amazon most recently raised the price on Prime subscriptions in 2022.

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.