Shares of Amazon (AMZN 0.64%) have fallen hard in the first half of 2022 and are down 32% year to date, according to data provided by S&P Global Market Intelligence. Part of the drop is due to the broader stock market's tumble as investors processed news of rising inflation and interest rate hikes from the Federal Reserve.
But the biggest reason for Amazon's share price drop this year comes from the company's dismal first-quarter results, which were reported back in April. The e-commerce company reported its first quarterly loss since 2015 and issued disappointing guidance that sent its share price into a downward spiral.
Amazon shocked analysts and investors when it reported a net loss of $3.8 billion in the quarter, its first quarterly loss in seven years and far below its net income of $8.1 billion in the year-ago quarter.
That loss came partly because of Amazon's investment in the electric vehicle (EV) maker Rivian Automotive. It owns about 18% of the EV company, and Amazon reported a pre-tax valuation loss of $7.6 billion related it its Rivian holdings in the quarter.
But Amazon's net loss also came as the company went on a hiring spree during the pandemic with e-commerce demand soaring. With tons of new workers and higher spending costs due to inflation, Amazon's expenses ballooned.
Investors were also disappointed with the guidance that management provided. The company said revenue for the second quarter would be in the range of $116 billion to $121 billion, lower than analysts' consensus average of $125.5 billion.
Investors will get a clearer picture of Amazon's finances when it reports second-quarter results, likely next month.
In the near term, Amazon investors could face some share price swings. Inflation is still stubbornly high and the company will continue to experience higher costs. And with the Federal Reserve focused on bringing inflation back down, more interest rate hikes are on the table, which could spook the market even more.
But over the long term, Amazon investors should keep in mind that the company is still a leader in e-commerce and cloud computing. It is in a solid financial position and could end up being a great stock to have many years from now.