Amazon is down 40% this year — is now the time to buy? Market pros give their take

Published Mon, Nov 21 20226:59 PM EST

Once a Wall Street darling, Amazon has lost some of its luster this year. The e-commerce giant's stock has fallen more than 40%, well underperforming the S & P 500 , which has declined about 15% in the same period. That's not all. In a memo to staff on Friday , CEO Andy Jassy said the company had made the "difficult decision to eliminate a number of positions" — just a week after The New York Times reported that the company was planning to eliminate about 10,000 jobs. The layoffs come as Jassy steps up efforts to rein in costs, in a stark departure from the earlier "growth at all costs" philosophy embraced by founder Jeff Bezos. Nevertheless, Amazon remains one of the biggest companies in the world. Even with the precipitous decline in its share price this year, the company is still valued at nearly $1 trillion. Two market pros faced off on CNBC's " Street Signs Asia " on Thursday to make a case for and against buying the stock. Long-term investment story Veteran tech investor Gene Munster believes "there is no company like Amazon" when it comes to e-commerce and logistics. The founder and managing partner at Loup Ventures acknowledged that the company had been through a "difficult period" of late, and things could remain tricky for the first half of 2023. But he believes investors will look beyond the present and see Amazon as a long-term investment story. "Investors look forward and ultimately, I believe this is a growth story. That despite the law of large numbers, this company is operating in large addressable markets. So not only will revenue growth be enough to sustain the long-term bull case — and I would put that in a category of 10% to 15% over the next several years — but also the big factor here is earnings growth, the opportunity to improve margins," Munster said. This potential for earnings expansion has been key to Amazon's valuation, he added. "We both know this has been the carrot that has been held out there forever when it comes to Amazon. That's why it trades at such a high multiple. It's not about revenue growth. The multiplier thing, it's more about earnings expansion," he said. Slowing growth But Tom Forte, managing director and senior analyst at D.A. Davidson, noted that Amazon is now a mature e-commerce company — one that requires $4.7 billion in incremental revenue just to post revenue growth of one-percentage point. He pointed to slowing growth in Amazon's cloud computing segment, which he described as a "higher margin, faster growth business" relative to its retail business. This will likely impact Amazon's profit growth over the next 12 months, he added. While Amazon is now pursuing new growth opportunities, some are not working out, according to Forte. He flagged Amazon's significant spending on content creation, such as its $715 million "Lord of the Rings" series — the most expensive TV show of all time. Forte noted that the series has an approval rating of just 39% on online review platform Rotten Tomatoes. But he is excited about one of Amazon's new pillar of growth: healthcare. On Tuesday, the company unveiled "Amazon Clinic," its new telehealth service. It comes as Amazon seeks to deepen its presence in healthcare, just months after it acquired primary healthcare provider One Medical for about $3.9 billion . "I do believe that healthcare is a tremendous opportunity. It's a trillion-dollar global market … Amazon can do a lot of things there. My concern though, is that there will be an air pocket in revenue growth until healthcare kicks in, and that could lead to weak results over the next 12 months, if not longer than that," Forte said. "So unfortunately, this isn't the Amazon in 1997 or 2007 or even 2017. It is going to be much more difficult for them to grow in the future and they need that growth to sustain their premium multiple. That I think is going to weigh on its shares more than anything else," he added. But Loup Ventures' Munster believes the Amazon will return to its core growth of "5% plus" in the next six to 12 months. "[Amazon] is instrumental to how we live our lives when it comes to retail, but they have other growth initiatives on top of that," he said. — CNBC's Annie Palmer contributed to reporting