Why Amazon Stock Is Sinking Today

Amazon (NASDAQ: AMZN) stock is slipping in Friday's trading. The tech giant's share price was down 4.1% as of 2:30 p.m. ET. Meanwhile, the S&P 500 (SNPINDEX: ^GSPC) was down 1%, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) was down 1.5%.

Amazon published its fourth-quarter results after the market closed yesterday, posting sales and earnings for the period that came in ahead of Wall Street's targets. But despite beating expectations for Q4, the company's forward guidance came in weaker than expected -- and investors are selling the stock in response.

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Amazon stock falls despite strong Q4 numbers

Amazon posted earnings per share of $1.86 on revenue of $187.79 billion in the fourth quarter, beating the average Wall Street estimate's call for a per-share profit of $1.46 per share on revenue of $187.23 billion. The company's North America segment, which is primarily driven by e-commerce in the region, saw revenue increase 10% year over year to $115.6 billion. Meanwhile, the international segment grew 8% compared to the prior-year period to reach $43.4 billion. Sales for Amazon Web Services (AWS) were up 19% year over year to $28.8 billion.

Overall revenue for the period was up 10.5% year over year in the quarter, and strong growth for the company's three core segments and continued efficiency initiatives powered a big improvement for profitability in the period. The company's operating income rose approximately 61% to hit $21.2 billion. Meanwhile, earnings per diluted share were up 86% year over year in the quarter. All in all, it was a very strong quarter for Amazon -- but investors are reacting negatively to the company's guidance for growth deceleration in this year's first quarter.

Amazon's Q1 forecast disappointed, but the long-term outlook remains strong

For the current quarter, Amazon is guiding for revenue to come in between $151 billion and $155.5 billion. The target is significantly below the $158.33 billion in sales that had been called for by the average analyst estimate. If Amazon were to hit the midpoint of its sales guidance for Q1, it would mean delivering growth of 7%.

Meanwhile, operating income for the period is projected to come in between $14 billion and $18 billion. If the business were to hit the midpoint of that target, it would mean posting growth of roughly 5%, compared to the $15.3 billion operating profit it posted in Q1 last year.

In addition to its Q1 targets, Amazon also laid out plans for a $100 billion investment this year in categories including cloud infrastructure, artificial intelligence (AI), and robotics. While this big spending push will put a damper on profitability in the near term, it looks like a smart move and should bolster the company's long-term positioning.

If you were looking for an entry point into Amazon stock, today's valuation pullback on strong Q4 results could be a worthwhile buying opportunity.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.