Are Amazon Outages Cause for Real Concern?
We love Amazon (AMZN) as a company. However, last year the abrupt move from $40 to $80 caught us off guard.
We’ve watched it closely and continue to like it but… lately there have been some major outages. Not just the ones that got headlines but quite a few more.
Speculation is out there about what might be going on but facts are few. If Amazon is having infrastructure problems, we have no doubt that they will figure them out and come back as strong as ever. However, until we know more, we think it’s best to avoid the shares. In fact we just took out a small short position.
Amazon is all about their infrastructure and while web services have not been impacted, as far as we know, they are certainly losing business from the public and the non-public outages.
In addition we might be in a bit of a lull as we enter the summer season. Kindle is very interesting but it’s early for it to move the needle much. Also other firms, like Google (GOOG), are entering the fray with potent alternatives to Amazon EC2 and S3.
Valuation is an issue here as well with the stock trading at levels that leave it vulnerable to selling in a rough market looking for excuses. Any more outages or other issues could send the shares down sharply.
We remain long term buyers on Amazon as a company but are keeping a neutral/negative postion for now.
Disclosure: Short position.
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This article has 4 comments:
Goodwin
Goodwin
I'd say, buy on a dip, like today, the stock is unchanged while market is up +1%, won't get a much better deal than that.
The website went down for a few hours, it happens to the everyone, no website, even google is up for 100% of the time. If a website goes down, it usually means they are overloaded, obviously Amazon try to estimate the load on their infrastructure. So I'm guessing there was a sheer "positive" surprise of incoming customers. I doubt it was anything else, since Amazon can throw pocket change at hardware and tech guys to provide raw horsepower and stability.
Brute!