Amazon Stock Sell-Off: A Buying Opportunity?

Shares of Amazon (NASDAQ:AMZN) took a big hit during after-hours trading on Thursday. About an hour after market close, the stock was down more than 7%. The decline followed the e-commerce and cloud-computing company's second-quarter results. The market was likely disappointed in the company's revenue growth rate, which came in lower than expected.

But investors may want to think carefully about whether such a sharp drop in the stock price is deserved. There are two good reasons why investors may want to look past Amazon's revenue miss and possibly even consider buying shares.

Amazon Stock Sell-Off: A Buying Opportunity?

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A tough comp

Amazon announced second-quarter revenue of $113 billion, up 27% year over year. Not only was this a deceleration from 44% revenue growth in Q1, but it was shy of the 29.4% growth that the consensus analyst estimate called for. 

But is the market's knee-jerk response to this worse-than-expected revenue growth an overreaction? Considering how tough of a year-ago comparison Amazon was up against during the quarter, probably. In the second quarter of 2020, Amazon's revenue soared 40% year over year. This is a much more difficult comp than the company faced in the first quarter of 2021. First-quarter 2020 revenue only increased 26% year over year.

Sure, Amazon did have one thing going in its favor in the second quarter of 2021 that it didn't have in the second quarter of 2020: Prime Day. Without Prime Day rescheduled to Q2 this year, Amazon's reported growth would likely have been even lower. Nevertheless, for a company generating over $100 billion in quarterly revenue, it's safe to say that 27% growth on top of 40% growth in the year-ago quarter is quite an achievement -- one that demonstrates how important Amazon's business has become to consumers.

Profits are soaring

Additionally, investors should take some time to appreciate Amazon's strong profitability. Net income in the quarter was $7.8 billion, or $15.12 per share. This was up from $10.30 per share in the second quarter of 2020 and easily surpassed analysts' average forecast for earnings per share of $12.30. 

Amazon has been benefiting from a swelling operating margin. The company's trailing-12-month operating margin has increased from 5.2% to 6.7% over the past 12 months. Combine this with the company's increasing revenue, and it's easy to see why net income is surging.

Overall, numbers for the quarter prove that Amazon is still a force to be reckoned with in e-commerce. Indeed, with 27% growth on top of last year's 40% growth, we can still easily call the e-commerce giant a growth stock. More importantly, a post-earnings sell-off may make Amazon shares an attractive investment today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.