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What I'll Be Looking For In Today's Amazon Earnings Report

|, Inc. (AMZN)

Amazon is set to report earnings today, here are two things I WON'T be watching.

1. Revenue growth: It'll be up. Double digits. Boring stuff. Don't run with the crowd.

2. P/E; It'll be sky high as always. Nothing to see here.

Here's what I will be looking at instead.

1. Accounting for the recently announced purchase of Kiva robotics. Assuming this deal has closed, this should be the first report showing the impact of this new operation.

Based on reviews, I gather that Kiva is far from profitable at the moment. Guidance for the most recent quarter did NOT include Kiva results, and ranged from -260 million to positive 40 million. So while the unit is very, very small compared to the rest of Amazon, negative earnings from the new unit SHOULD force Amazon to teeter into the red even if the rest of the company was on the high end.

But, I don't think Amazon's accountant's will let that happen. They'll either hold off on reporting the new unit until a more profitable quarter AND/OR we'll see hocus-pocus earnings reported for the unit.

2. Growth in leases. It's nice that Amazon reports this number on a quarterly basis- but quite frankly, the leasing obligations are growing faster than sales and that fact- Amazon is still building warehouses at a double-digit clip- should scare the bejeezus out of investors thinking about the long term.

With sales taxes coming, out-of-state warehouses are not the future of ecommerce. Digital downloads, 3-D printing, temporary stores, mobile trucks, locker pickup, and local warehouses are all more efficient delivery mechanisms and are on the horizon.

Amazon is even leading the way in many of these areas- and good for them. But it doesn't matter, seeing the future is pointless if you can't let go of the past. IMHO, the long term longevity of a company depends more on how efficiently they can exit declining markets than on how exuberantly they embrace emerging ones.

The company is still seeing growth from the "click-and-wait" model- but this is when they need to start exercising discretion and dialing back on growth, even if it means sacrificing revenue in the short term. Leases have five to ten to twenty year terms, so you can't just exit overnight, and sales from old business model tend to tank before the business model replacing it becomes profitable- regardless of market share.

This is particularly important for Amazon because Jeff Bezos, for all that he is praised as a long term thinker, has never had to actually do this before. When he started Amazon he was starting from scratch, he never HAD redundant infrastructure to clean up.

If today's filing shows lease obligations growing significantly faster than sales, again, I believe Amazon is on the fast track towards bankruptcy in the next decade.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: AMZN