Amazon.com Likely to Remain Range-Bound for Time Being

I have written here previously about shorting Amazon.com (AMZN), and if you played the trade and held on long enough, it paid off nicely.

But with this recent earnings report, I think my original assessment of Amazon was wrong. I think that I have somewhat underestimated their ability to get it done in a very tough consumer environment.

With the out-of-whack P/E and investors seeking the shelter of stability, I don't see this making a run to $120 or even $100. But at the same time– without a catastrophic catalyst– I don't see a drop to $50 or even $60.

I think for the time being Amazon is going to be stuck in a range, and for those daytraders out there who pay attention to the intricacies of its intraday movements, there will be the obligatory daily ups and downs of a few bucks that can be played. But for the investing crowd, I see this languishing mostly in place until the economy improves and the stock goes up, or the economy doesn't and Amazon eventually misses estimates and goes down.

Either way, the pending results will be telegraphed… the macroeconomic indicators will show improvement before Amazon makes any real move, so there will be plenty of time to get in. In the mean time, I am on the sidelines with this one, except if time permits for the occasional day trade.

Disclosure: None

Comments

[omooc:]

I read somewhere that AMZN's earnings for 2Q were due, largely, to a one-time gain. Perhaps I read incorrectly.

2008 Jul 28 09:12 AM

[waldipup:]

Dont follow this , but went to buy something there the other day and found they now charge tax on internet purchases -

In NY at least.

Wonder if that will affect sales at all?

2008 Jul 28 10:05 PM

[David Tsao:]

omooc,

AMZN sold their European DVD rental business, while at the same time experienced a reduction in gross margins due to price promotions, Amazon Prime, and other factors. Breaking it out, they went from 27.1% in gross margin to 25.8% in North America, and grew 20.8 to 21.5% from their international channel.

2008 Jul 29 09:47 PM