This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Key Points
- Three years ago, Amazon was saddled with costs from its lockdown-era capacity improvements.
- The company's stock had fallen by nearly 50% in November 2022.
- Investors who bought Amazon roughly doubled the return of the S&P 500.
After Amazon's (NASDAQ: AMZN) recent earnings report shattered expectations and sent its share price upward by double-digit percentages, it's hard to remember that just three years ago, the company was seemingly on the ropes, with a stock price that was cratering.
If you'd bucked the trend and bought just $100 in Amazon stock three years ago, it would have been a market-beating move. Here's why.
Why Amazon stock was tumbling
2022 was not kind to Amazon. The costly investments it had made to boost capacity during the lockdown era were still eating into its net earnings, but the anticipated volume growth hadn't materialized. In an attempt to slim down its operations, the company implemented a hiring freeze, ended experimental projects, and cut 18,000 jobs.
However, the severance costs of those job cuts -- $640 million -- landed in Q4 2022, right as Amazon was also recording paper losses of $2.3 billion from its investment in electric vehicle start-up Rivian. Amazon would go on to report a $2.7 billion net loss for 2022, its first annual net loss since 2015. As a result of this turmoil, Amazon's stock fell by almost 50% in 2022.
Here's how much a $100 investment from three years ago is worth today
Since turning the corner in 2023, Amazon's stock has been on a mostly upward trajectory, except for a brief dip early this year. A $100 investment from November 2022 would today be worth about $242:
Data by YCharts.
That's a 142.3% price return over that timeframe and more than twice the 71.6% return from a $100 investment in the S&P 500 (SNPINDEX: ^GSPC). The S&P 500 investment would have grown to about $171 (or $179 if you factor in reinvested dividends).
It just goes to show that buying stock in quality companies when they're facing a short-term setback can be a great route to long-term stock market success.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
