Amazon Sell-Offs On Margin Weakness Are A Gift

Amazon.com, Inc. AMZN plunged as much as 9 percent after the firm’s July 27 earnings miss, and generally, this kind of disappointment merits no optimism.

But Piper Jaffray analyst Mike Olson sees an opportunity.

“Historically, these sell-offs in Amazon related to margin weakness have been a gift, and buying on these pullbacks has proven to be a solid strategy over time,” Olson said Wednesday on Benzinga’s PreMarket Prep radio show.

He attributed the miss to the company’s long-term growth plan, which appears no less feasible following the miss.

“World domination is expensive, and Amazon really isn’t backing off on its strategy to invest in a way that widens the gap between itself and its competitors,” he said. “Meanwhile, the company is adding new addressable markets that total in the hundreds of billions, so that all takes significant investment.”

Amazon’s performance followed enduring hype inspired by this quarter’s acquisition of Whole Foods Market, Inc. WFM and the company’s emerging role in groceries.

“The growth was very strong,” Olson said. “Putting it very simply, they are selling more stuff, but it’s proving to be at ultimately a lower margin as they invest in a business.”