Amazon Stock Just Got Crushed—Time to Load Up or Bail Out?

Amazon shares just took a nosedive—classic Wall Street panic or a golden buying opportunity?

Tech investors are scrambling after AMZN's brutal sell-off. The question isn't just about recovery—it's about whether Bezos' empire still has gas in the tank.

Here's the cold truth: When blue chips bleed, crypto bulls laugh. While traditional investors hyperventilate over single-digit dips, decentralized assets keep printing 10x moves. Maybe it's time to ask why you're still playing checkers when the crypto market's playing 4D chess.

Image source: Getty Images.

What spooked investors

On the surface of Amazon's second-quarter results, the company crushed it. The e-commerce and cloud-computing juggernaut reported revenue of $167.7 billion, up 13% year over year. Earnings per share grew even faster, climbing 33% to $1.68. The consensus analyst forecast called for revenue and earnings per share of just $162.1 billion and $1.33, respectively.

Making the report look even better, the company guided for another quarter of double-digit revenue growth in Q3. Specifically, management said it expected revenue for the period to be between $174.0 billion and $179.5 billion, translating to 10% to 13% year-over-year growth.

Still, the company may have missed the mark in the report in two areas.

First, AWS revenue grew about 18% year over year. That's a meager growth rate compared with the 39% and 32% year-over-year revenue growth seen at Microsoft's Azure and Alphabet's Google Cloud, respectively. These two competitors' revenue in their cloud businesses was significantly higher than analysts' average forecasts for the important units, while Amazon's barely beat forecasts. Investors may be concerned that Amazon's lower growth indicates the company isn't effectively capitalizing on cloud-computing opportunities in the rapidly expanding AI services market.

Another potential reason for investor skittishness is Amazon's guidance for third-quarter operating income to be between $15.5 billion and $20.5 billion. The midpoint of this guidance range is $18 billion, representing only 3% year-over-year growth.

A buying opportunity

But here's where things turn optimistic for investors. Sure, shares have taken a painful hit. But with the stock down more than 9%, the market has arguably overreacted to Amazon's more modest cloud growth compared to its competitors, and to management's muted expectations for third-quarter profitability.

Zooming out, this is still a business growing its sales at double-digit rates. In addition, its business is supported by both a robust e-commerce business and a cloud business, which has just nearly 18% year-over-year top-line growth -- slightly faster than the segment's growth rate in the prior quarter. Sure, it may not be as fast as Azure's and Google Cloud's growth. But it's still a very strong rate.

With the stock now trading at just 33 times earnings, this is a rare opportunity for investors to buy into one of the United States' best companies at a reasonable valuation. Sure, there's no telling where the bottom is. Shares could get cheaper. Additionally, the risks of Amazon losing its edge as AI becomes more central to cloud computing are real. Investors, therefore, will have to continue keeping tabs on how AWS performs in the coming quarters. Ultimately, however, risks seem largely priced in. The long-term investment outcome from this price will likely be respectable.

So should investors buy the dip in Amazon stock? I think so.