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Why is Amazon stock crashing? Blame supply-chain issues and labor shortages

AMZN shares sink in premarket trading after disappointing Q3 results.

Why is Amazon stock crashing? Blame supply-chain issues and labor shortages
[Illustration: FC]

It’s been a rough week for tech stocks. Over the past few days, virtually every major tech company has reported quarterly earnings, and many of them haven’t been what investors were hoping. As for why expected (or hoped for) earnings aren’t materializing, the reason depends on which tech company you look at. For example, Snap was walloped by Apple’s new ad privacy rules, while Apple itself yesterday missed street expectations due to lower sales because of pandemic-related supply-chain issues.

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But another company also disappointed investors yesterday: Amazon. The tech behemoth reported Q3 sales that were below expectations and signaled the upcoming all-important holiday Q4 might see choppy waters, too. That’s sent AMZN stock down almost 5% in premarket trading at the time of this writing, according to Yahoo Finance.

So what’s driving Amazon’s misses? The company blamed two main issues: supply-chain problems and labor shortages, reports The Wall Street Journal. In other words, it’s a classic supply and demand issue. Global supply chains have been disrupted thanks to the ongoing COVID-19 pandemic, with factories shut or operating at reduced capacity. And due to the supply-chain issues, related demands and costs are increasing.

But the even bigger issue facing Amazon is labor shortages, which are more pronounced in America than in the rest of the world. As the Journal notes, Amazon CFO Brian Olsavsky said the company has had inconsistent levels of operations staff due to staffing issues. Everyone wants workers right now, so it’s really a job-seekers market.

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All this means Amazon expects to “incur several billion dollars of additional costs in our consumer business as we manage through labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs” in Q4, Amazon CEO Andy Jassy said, further rattling investors.

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