Amazon (AMZN) was one of the primary beneficiaries of the pandemic as consumers were forced to engage in commerce digitally and corporations became increasingly willing to migrate to the cloud. In the first year or so after the March 2020 COVID Crash, AMZN shares soared from $2,000 up to $3,700. Since peaking in mid-2021, however, it has been a different story. Since AMZN reported earnings last night, shares have fallen another 15%. This leaves AMZN up just 13.5% from the level it was trading at right before the pandemic began on 2/19/20.
Although the stock is now barely higher versus pre-COVID levels, revenues continue to climb. Relative to pre-pandemic levels, trailing 12-month revenues have increased by 70.3% (CAGR of 27.2%). As implied, the price to sales multiple has compressed considerably relative to pre-pandemic levels. At the highs, AMZN was trading 3.8 times sales. The highest P/S multiple for the stock since the start of 2020 occurred in September of 2020, when the multiple hit 5.5. As it currently stands, the price to sales multiple is at new lows relative to the start of 2020 at just 2.7.
While AMZN revenues are up 70% from pre-COVID levels, margins have compressed considerably. In Q1 2020, AMZN posted operating margins of 9.5%. In Q1 2022, AMZN reported operating margins of 3.2%. These results can be attributed to inflationary pressures, labor challenges, supply chain constraints and foreign exchange headwinds. As you can see in the chart below, margin compression has hampered EPS, resulting in a decline in trailing 12-month EPS over the last three quarters. Relative to pre-pandemic levels, EPS have risen by 52.5% (CAGR: 21.1%), but they’ve declined by 38.8% over the last three quarters. Click here to become a Bespoke Institutional subscriber and gain access to our Conference Call Recaps.