The stock market has been volatile all week, as major companies have released their latest earnings results and shown the impact that current economic conditions are having on businesses. That volatility looked poised to continue for the Nasdaq Composite (^IXIC 1.64%) on Friday morning, with futures contracts on the tech-heavy index down nearly 1% in premarket trading.
The biggest drag on the Nasdaq on Friday morning came from Amazon (AMZN -9.78%), which issued a financial report that created concern among investors across the sector. Meanwhile, though, another company in tech that has gotten beaten down a lot more over the years showed some signs of recovery. Below, you’ll see more about what made Amazon stock lose ground, as well as why investors are taking a closer look at Intel (INTC 10.20%).
Amazon sees tough times ahead
Shares of Amazon were down almost 14% in premarket trading on Friday morning. The e-commerce and cloud computing giant’s third-quarter results showed the pressure that the retail sector is feeling right now, and things look like they could get worse entering the key holiday quarter.
Amazon’s financial numbers were mixed. Revenue was up 15% year over year to $127.1 billion, even after accounting for 4 percentage points of downward pressure from the strong U.S. dollar. However, net income fell 9% from year-ago levels to $2.87 billion, resulting in earnings of just $0.28 per share. Moreover, that figure actually included a valuation gain of $1.1 billion from Amazon’s stake in EV manufacturer Rivian Automotive, and operating income was down by nearly half as losses in the e-commerce business offset healthy profits from Amazon Web Services.
Moreover, Amazon projected an even bigger slowdown in the coming quarter. Fourth-quarter guidance called for Amazon to see revenue of $140 billion to $148 billion, which would represent year-over-year growth of just 2% to 8%. Operating income projections were in a range of $0 to $4 billion, suggesting substantial deterioration from year-earlier levels is likely once again.
If the decline in the stock sticks, it would bring Amazon’s share price to its lowest levels since the beginning of the COVID-19 pandemic in early 2020. Moreover, if the holiday season truly does go as poorly as Amazon’s guidance suggests, it could spell trouble for the entire retail sector.
Intel makes a comeback
On a more positive note, shares of Intel were up more than 7% in the premarket trading session on Wall Street. The chipmaker has had plenty of challenges to face over the years, but its latest financial report showed some optimism within the business even though conditions remained tough.
Intel’s financial numbers weren’t pretty. Revenue of $15.3 billion was down 15% year over year on an adjusted basis. Adjusted net income plunged almost 60% from year-ago levels to $2.4 billion, working out to $0.59 per share. However, as big a drop on the bottom line as Intel suffered, most investors had expected even worse, so the figures came as good news in the eyes of many.
Intel is working hard to boost its efficiency, aiming to achieve $3 billion in cost reductions in 2023. That in turn could be just the beginning of broader efforts that could eventually bring annual savings of $8 billion to $10 billion by the end of 2025.
Even though the stock has been under pressure, Intel has taken steps to make shareholders happier, including this week’s listing of shares of its Mobileye Global autonomous driving technology unit. Yet even after today’s gains, the stock remains at levels seen consistently in the early 2010s, and it’ll take a lot of work to get Intel shares back in the good graces of investors across the stock market again.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dan Caplinger has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Intel. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, short January 2023 $57.50 puts on Intel, and short January 2025 $45 puts on Intel. The Motley Fool has a disclosure policy.