What led to the Amazon’s stock plunge in 2022?

According to recent reports, Amazon’s stock plunge has resulted in a significant loss in the first three months of the year.

Sharp Drop in Income

Amazon reported a net loss of $3.8 Billion in the quarter ended March 31, 2022. As a result, the company reported a sharp drop in income. Amazon attributed the loss largely to a $7.6 billion loss from its investment in electric automaker Rivian Automotive. Rivian, into which Amazon led a $700 million investment in 2019, has seen its stock plummet more than 75% since its blockbuster November 2021 IPO.

Amazon’s stock plunge around 10% in after-hours trading following the results. Amazon’s overall revenue grew 7% from the same period last year to $116.4 billion, slightly beating analyst forecasts but slower than the 9% growth in the final months of last year. The company forecast that revenue growth would slow further next quarter, anticipating a growth rate of between 3% and 7%.

Reason behind Amazon’s Stock Plunge

The company also announced that Prime Day, its annual sales bonanza, will take place this July in more than 20 countries. In an earnings call, Amazon’s chief financial officer, Brian Olsavsky, said higher inflation, fuel prices and labor constraints added $2 billion to costs compared to last year. “The cost to ship an overseas container has more than doubled compared to pre-pandemic rates,” he said. “The cost of fuel is approximately one and a half times higher than it was even a year ago.”

The rise of the Omicron variant towards the end of 2021 led to ‘a substantial increase’ in employees going on leave, prompting Amazon to increase hiring to make up for the absences, Olsavsky said. But as workers returned when the variants subsided, “we quickly transitioned from being understaffed to being overstaffed,” he added. That resulted in lower productivity adding another $2 billion in costs.