Amazon Shares Dip on Wall Street Fears: What Investors Need to Know

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What's happening in the headlines can affect you as an investor. Here's what's going on, what you need to know, and what you can expect next.

The headline
Reuters is reporting that Amazon.com's (NAS: AMZN) share price has fallen to its lowest level since late March, on concern about sales growth during retail's crucial fourth quarter. 

The details
Yesterday, Goldman Sachs analysts reported that Amazon has typically beaten overall online sales growth by 23 points. comScore reported earlier this week that online holiday spending in the U.S. rose 15% to a record $35 billion from Nov. 1 to Dec. 26, versus the comparable period last year. That would suggest a 38% increase in Amazon sales this season, below the 44% increase Wall Street expects.

Shares of Amazon fell as low as $166.97 in early trading today. By midday, however, the stock had fully recovered.

Now what?
One of the downsides of being a public company is just this sort of thing -- a big Wall Street investment bank coming out of the blue with a calculation that gets widely reported and sinks your stock, even when nothing fundamental to your business has changed.

Amazon shares reached almost $250 in October but have dropped by about 30% since then, primarily on fears that the company was going to take too big of a profitability hit on its Kindle e-readers. This columnist thinks that Amazon is looking Foolishly long-term here, i.e., breaking even or even taking a small loss on the Kindle to draw people into the company's products-and-services ecosystem. But at least it's comprehensible why the stock price took a dive.

Regardless, the market -- rationally exuberant when at its best -- has nicely sorted Wall Street out this time. As is our mantra here at The Motley Fool, keep an eye on the fundamentals of the companies you're invested in, and stay calm through the day-to-day turmoil that will always be part of the stock market. Like us, you're in it for the long term.

Oh, and take whatever the Street says with a very large grain of salt. Keep track of what's happening with Amazon.com by adding it to My Watchlist, a free service of The Motley Fool that lets you easily keep up with everything on your investing radar.

At the time this article was published Fool contributorJohn Grgurichloves his Twitter news feed so much he wants to marry it, but he owns no shares of Amazon.com.The Motley Fool, however, owns shares of Amazon.com. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has a scintillatingdisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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