Amazon.com (AMZN -4.21%) endured a brutal 14% sell-off on Friday after its Thursday night earnings report, and now trades at levels not seen since April of 2020. But in contrast to a name like Netflix (NFLX 0.20%), which is now contemplating worrisome changes to its business model,  Amazon's drop seems overdone and a great buying opportunity for the long-term.

While knee-jerk reactions to guidance are the norm for Amazon, long-term investors can take solace in these three bullish trends hidden underneath the doomsday headlines.

E-commerce results and guidance were weak, but not on a "stacked" basis

The main problems with Amazon concern its e-commerce retail segments, which appeared to slow considerably. First-party (1P) goods actually saw negative growth last quarter, and third-party (3P) sellers fell to single-digit growth -- a big deceleration from the pandemic era. Advertising came in pretty strong, but also decelerated from 76% growth a year ago to just 25% growth in constant currency. Amazon's guidance for 3%-7% overall growth next quarter (though 5% to 9% in constant currency) also left something to be desired, marking yet another deceleration from the current quarter.

So why shouldn't investors worry? Because the long-term growth trend of e-commerce taking share of overall retail still seems intact. E-commerce obviously saw a massive bump when people were quarantining during the pandemic, so the fact Amazon can grow at all when lapping that period is pretty impressive. Let's look at year-over-year revenue growth results between the North American and international segments, which incorporate all non-cloud businesses into holistic segments spanning 1P, 3P, advertising, physical stores, and subscriptions, on a two-year "stacked" basis:

Amazon.com Segment

Q1 2021 

Q1 2022 

Q1 2022 Two-Year CAGR

Q1 2019 

FY 2019

North America

39%

8%

22.5%

17%

21%

International

50%

0%

22.5%

16%

13%

Data source: Amazon earnings releases. Growth figures in constant currency. YOY= year-over-year.

As you can see, even when factoring in the past "disappointing" quarter, e-commerce growth is still accelerating on a two-year stacked basis, both in the U.S. and internationally, when compared to 2019. 

While the pandemic definitely pulled forward demand, investors shouldn't concern themselves with the deceleration today. Of course, investors also shouldn't have taken the late 2020 and early 2021 growth figures as the "new normal" either, although the pandemic does seem to have accelerated e-commerce growth slightly overall, since the two-year stacked growth rate is still above 2019 levels.

View from box looking up as excited young woman opens it.

Image source: Getty Images.

AWS continues to crush

I've written before that I think Amazon Web Services could potentially be worth all of Amazon's market cap today if it were a standalone business, and Q1 results didn't diminish from that thesis. In fact, the case may have gotten stronger. AWS posted very strong 37% growth in the first quarter; additionally, the company also reported a huge step-up in operating margins, from 29.8% in the fourth quarter 2021 to 35.3% last quarter. While that was due to an accounting change extending the life of servers, that should be a permanent change and a permanent step-up in margins, if Amazon doesn't cut prices to offset that.

Skeptics might say, "AWS decelerated from 40% growth last quarter!" Again, if one looks at AWS on a two-year stacked basis, that's not really the case.

AWS Metric 

Q4 2020

Q4 2021

Q4 2021 Two-Year CAGR

Q1 2021

Q1 2022

Q1 2022 Two-Year CAGR

Revenue growth (YOY)

28%

40%

33.9%

32%

37%

34.5%

Data source: Amazon Q1 2022 earnings release. YOY=year-over-year.

On a two-year basis, AWS growth actually accelerated, quite the opposite conclusion of those looking at the quarter-to-quarter variance.

Once again, as we get through these pandemic-era comparisons, investors should pay attention to the comparisons to a year ago and the multi-year average growth rate, rather than quarter-to-quarter movements. That may not always be the case in "normal" times, but since the COVID pandemic introduced such crazy volatility, investors need to do some extra work until we are past lapping the extraordinary period from 2020 through mid-2021.

Look for lower cost growth in H2

It is true that Amazon's bottom line has been disappointing, as it had to spend huge amounts on capacity expansion and hiring when construction costs went up and labor shortages caused a spike in salaries.

Yet with management now saying Amazon has gone from under-staffed to over-staffed, things should get much better in the second half of the year. Normally, Amazon has to increase its capacity for Prime Day and then the fourth quarter holiday season, but it probably won't have to this year.

Since Prime Day has moved from the second quarter last year to the third quarter this year, this sets up a dynamic whereby Amazon should report really good numbers in the back half of 2022, barring a bad economic recession. That's because it will finally be lapping a "normal" quarter following the widespread distribution of vaccines, so its top-line growth will look much better. Meanwhile, since Amazon has spare capacity and employees, it won't have to spend as much in the back half of the year as it normally does. And if Amazon gets a break on gas prices, that would be a cherry on top.

Meanwhile, Amazon will probably be repurchasing stock through the year, and its stock will have split by the back half, which could attract more retail investors.

In other words, buying Amazon stock amid today's turmoil could end up looking pretty smart a year from now.