An Amazon employee tapes up a box for shipment

Amazon shares have lost a quarter of their value since their peak in early January. This has nothing whatsoever to do with changes in the company’s performance.

Amazon has reported quarterly reports twice since its high – first-quarter results came out late on Thursday – and the price fell on Friday as it did after fourth-quarter results in January. Do not be fooled. The usual Amazon results, which consist of revenue growth around 20 per cent and net profits slightly above or below zero, were duly delivered both times.

There were minutiae in both reports for those who sweat over them for pleasure or pay: little vibrations in cost lines or growth rates in certain segments. But any rational person who owns a company with a $140bn market cap, when that company has made $5bn of profits in the past decade, is committed to the idea that the details do not matter. And they might not. Another ten years of growth at the current rate, and Amazon will sell half a trillion dollars in goods a year. That will make it a new Walmart – only with better margins, thanks to highly profitable digital products. If you think the broad trends are in place to make that happen, the fact that Amazon invested a lot of money in China one quarter does not matter. Return on invested capital and gross margin, two metrics that do matter, have been improving.

Nor has product news justified the price move. Amazon keeps prices low, builds infrastructure, and tries new retailing ideas, from fresh food delivery to a set-top box. It has always done this. If, say, Amazon buying expensive content from HBO throws you, you own the wrong stock. An experimental, investment-heavy strategy is absolutely the rational one for management to pursue, given that its investors are happy to supply the company with extremely low-cost equity capital.

The price fall is about the market, not Amazon. Should believers cover their eyes and hang on, then? No. They should study the competition’s progress. Long-term growth stories are always and everywhere about high barriers to entry. If the barriers to Amazon’s markets are getting lower, there is a real reason to sell.

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