The biggest e-commerce brand in the world’s stocks have started to plummet. Amazon just reported a recent net loss of $3.8 billion — but what caused it all to happen?
Amazon announced their nearly $4 billion loss in the first quarter of the year ending on March 31. This loss was a far cry from a projected $4.4 billion profit for the first three months of 2022.
In comparison, around the same time last year, the online retailer had a staggering profit of $8.1 billion.
But what is the story behind Amazon’s massive loss?
The consequences of bad investments
The first factor that Amazon attributed to this Q1 loss was its $7.6 billion investment in the electric car manufacturer, Automotive Revian.
Automotive Revian’s stock has dropped 75% since it went public with a bang in 2021. Ford, another early investor in the electric automaker, reported a similar $3.1 billion loss on April 27th.
However, Amazon is so big that one bad investment alone was not the only thing that worked against them.
Inflation’s role in Amazon’s loss
Amazon’s Chief Financial Officer, Brian Olsavsky, had this to say about inflation’s impact on their decreased revenue:
“The cost to ship an overseas container has more than doubled compared to pre-pandemic rates. The cost of fuel is approximately one and a half times higher than it was even a year ago.”
Olsavsky also explained that this added $2 billion to Amazon’s operating expenses.
What does this mean from an investment standpoint?
At the end of the day, the takeaway is that Amazon violated the very first rule of investing.
NEVER LOSE MONEY.
With a company the size of Amazon, they invested a lot of money into something that could not generate enough profit because it is not widely used.
That’s why I prefer my multifamily real estate. I’m not trading paper for paper. I’m not investing in assets that don’t result in proven cash flow. Everyone needs a place to sleep, and they pay me every month.
Be great and invest to win,
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