Shares of e-commerce and cloud-computing juggernaut Amazon (AMZN -0.17%) have crashed more than 50% since peaking in late 2021. Amazon's market capitalization has tumbled below $1 trillion, and while revenue continues to grow, profit and free cash flow have fallen off a cliff. For the trailing-12-month period, even the most optimistic measure of free cash flow that Amazon reports was a loss of $19.7 billion.

While some might be betting on a comeback for the stock, there are a few reasons to believe that it will continue to come under pressure in 2023. While it's hard to say whether Amazon is a good long-term investment, it looks pretty dicey in the short term. Here's why.

1. A struggling retail business

The retail side of Amazon -- which includes direct sales, the third-party seller business, Prime, advertising, and essentially everything that's not Amazon Web Services (AWS) -- is having some issues.

The company overbuilt during the pandemic as it raced to meet intense demand, and now it's dealing with too much capacity, an uneven consumer spending environment, and competition from traditional retailers like Walmart and Target that spent the pandemic investing heavily in e-commerce.

Amazon's North America and International segments combined to produce more than $300 billion of revenue through the first nine months of 2022, but both segments lost money on an operating basis. Between them, Amazon booked an operating loss of more than $8.1 billion.

During that nine-month period, those two segments included $9.5 billion of advertising revenue, which is presumably a high-margin revenue stream; $8.9 billion in subscription-services revenue like Prime, and $28.7 billion of revenue from third-party seller services. Those sources are growing faster than revenue from online sales, and yet both segments are now posting large losses.

Amazon's fast-growing advertising business gets a lot of attention, but it hasn't improved the bottom line at all. It doesn't make sense, in my opinion, to treat Amazon's advertising operations as a distinct business because it's intimately tied to the retail business. All that advertising revenue appears to just be subsidizing losses elsewhere.

It's great that Amazon figured out how to generate billions in advertising revenue, but ads have done absolutely nothing to improve the profitability of its retail business. As consumers pull back, Amazon's retail business might be a drag on profits throughout much of 2023.

2. A potential AWS slowdown

AWS is an incredible business. It's the dominant provider of cloud infrastructure services, and is still growing quickly and producing sky-high profit margins. In the first nine months of 2022, AWS revenue jumped 32% to $58.7 billion, and operating income soared 30% to $17.6 billion.

In the long run, the cloud infrastructure industry should continue to grow at a healthy clip. On top of newer companies being cloud-first as a matter of course, large enterprises have plenty of on-premises workloads that could be shifted to the cloud over time. AWS is tailor-made for the largest enterprises, and it will likely win a lion's share of those deals.

In the shorter term, however, a slowdown is a distinct possibility. A potential recession next year will put many companies into cost-cutting or survival mode. Start-ups that previously didn't worry about soaring cloud-computing bills will start taking a closer look and work to optimize costs. Enterprises that love to talk about "digital transformation" will slow down or put those plans on hold.

Amazon's market capitalization -- nearly $900 billion -- is largely based on the assumption of continued rapid growth and strong profitability of AWS. If that growth slows and margins contract as companies slash costs, the stock market could rethink the company's premium valuation. The stock is already down more than 50% from its all-time high, but the valuation is still extreme.

Based on the average analyst estimate for 2023, Amazon stock trades for more than 50 times earnings. That estimate has wide error bars, but it's hard to argue that the stock is cheap. If AWS shows signs of slowing demand in the next few quarters, the bottom for the shares could be quite a bit lower.