Short Amazon Ahead of Wednesday Earnings - AmTech

Well, here’s a man who is willing to stick his neck out.

Tim Boyd, of American Technology Research, this morning advised investors to short Amazon.com (AMZN) shares ahead of the company’s announcement of first quarter results on Wednesday afternoon.

Boyd thinks results will be in line; the Street sees $4.1 billion in revenue, $196 million in operating income and EPS of 32 cents. But he thinks investors are expecting more, and won’t get it. “Given the material deterioration in the U.S. consumer’s balance sheet YTD, we believe that AMZN is unlikely to post the kind of revenue upside to which the market has become accustomed over the last year,” he writes. “In addition, the fact that the Street is modeling operating income at the high end of management’s guidance range leaves little chance of an upside surprise on the bottom line.”

Boyd thinks 2008 updated guidance will be incline with current guidance; he expects $19.3 billion in revenue and $908 million in operating income.

“There is no way other way to explain the valuation disconnect between AMZN and the rest of the tech sector than to suggest that the market wants - and expects - clean beat and raise results every quarter,” he says. “Ironically, AMZN has not deliver the ‘raise’ side of this equation for two consecutive quarters - at least on the operating income side.”

Boyd concludes that Friday’s rally, in which the stock gained $6.06, “has created an opportunity to short the stock into the print.”

Comments

[bds231:]

Logically, I agree with the analysis, but amzn seems to be just completing a very nice (and bullish) inverse head and shoulders pattern right now... I would be worried about the market doing something crazy irrational when the earnings are announced and the stock heading back up into the 90s.

Just IMHO, but I think there will be easier ways to make money this earnings season.

2008 Apr 21 11:19 PM

[jchenry:]

i am short amzn at 80. my target is 50. target is the gap up created on 25 april 2007. stop at 84. possible upside to 95 (jan 4 gap down). big short interest in the stock (troubles me). either way tomorrow may show the direction.

2008 Apr 22 01:31 PM

[fxtrader07:]

@jchenry: good luck. that stop at 84 might turn out to be a $90 stop effectively.
The strong euro and the weak dollar will help amzn a great deal and the question is whether the initial reactions (first hours, first trading day) after the earnings report will focus on possible margin erosion ex currency windfalls. To me, the odds are pretty high that amzn will top here over the next few days/weeks, as willl fslr after their next quarterly report. that said, i do not see a compelling reason why i should pile in ahead of the earnings reports. of course, i may miss s first move down, but then again, rather a foregone profit than a loss made due to hurry and fear of missing anything

2008 Apr 23 07:53 AM

[fgjsfd;g:]

Goood call. I went short into earnings.

2008 Apr 23 04:42 PM

[zenalgorithm:]

Very, very nice call!

2008 Apr 23 10:10 PM

[Ames Tiedeman:]

AMZN dropped after earnings. Good call.

2008 Apr 27 08:58 PM

[seattleite:]

whats the good call on this ? It went from 80 to 78. Where is the "good" part of the call?

2008 Apr 29 12:14 AM