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Amazon (AMZN +4.5%) has done a complete about-face after missing Q3 estimates and issuing soft...

Amazon (AMZN +4.5%) has done a complete about-face after missing Q3 estimates and issuing soft Q4 guidance (I, II). The Street priced in some worries ahead of time, and could be taking kindly to healthy customer account growth and third-party merchant activity. Nomura's Brian Nowak, who has been bullish for a while, is pleased Amazon's gross margin rose 180 bps Y/Y (albeit while falling Q/Q), but is concerned about still-soaring fulfillment expenses. Overstock (OSTK +6.7%) and eBay (EBAY +1.4%) are also up. (transcript)
Comments (46)
  • This is crazy......


    With any other stock, it would have been taken to the woodshed


    But not AMZN....Missed both top line and bottom line and the stock rallies over 4%....
    26 Oct 2012, 10:03 AM Reply Like
  • Today's rally (and last quarter's rally) beg questions:


    Is this a significant event in history? Does it damage the credibility of the Efficient Market Hypothesis?
    26 Oct 2012, 05:00 PM Reply Like
  • Gross margin will fall more during Q4, it's kinda obvious - most of the improvement came from the Kindle Fire and Kindle eReader almost ceasing to sell (before the new models came at the tail end of Q3).


    The rest of the improvement comes from accounting for AWS and third party sales at 100% GM (which is rather misleading, since neither is 100% GM).
    26 Oct 2012, 10:04 AM Reply Like
  • I have another bubble stock for you: PANW. It's P/E = 6,000!
    26 Oct 2012, 10:07 AM Reply Like
  • The main problem with AMZN is not the valuation per se, but the fact that fundamentals have been heading the wrong way for 2 years now, to the point where 2012 is already estimated to produce a loss.
    26 Oct 2012, 10:10 AM Reply Like
  • Also the sheer size. It's market cap is too large to maintain this sort of anomalous valuation. Sort of like how even Republicans revolted when Sarah Palin was on the ticket to be Vice President: it was okay to have someone like that as a Governor of Alaska but not as a potential President. Same thing for Amazon. It's playing in the major leagues with a $107.9 billion dollar market capitalization yet it doesn't put up the numbers. Time to get cut from the roster.
    26 Oct 2012, 04:42 PM Reply Like
  • Can you imagine what WEB would make of AMZN's financials? lol.
    A classic example of the markets being completely irrational and a stock trading untethered to its economic fundamentals.
    26 Oct 2012, 05:47 PM Reply Like
  • Jeff Bezos has funny photos of various hedge funders, institutional investors, and investment bankers and threatens to put them all for sale with free 2 day shipping (no Amazon Prime required), if they don't all buy the stock.


    It's a good thing I was short from 250+, but maybe it's time to pull the plug.
    26 Oct 2012, 10:07 AM Reply Like
  • AMZN short term target is $200.
    26 Oct 2012, 10:09 AM Reply Like
  • And when you overpay for somethings, like the Seattle Campus for instance, wouldn't you expect these friends to return the favor?
    26 Oct 2012, 12:53 PM Reply Like
  • That's very suspicious as well, yes.
    26 Oct 2012, 01:09 PM Reply Like
  • Dead cat bounce bitchez!
    26 Oct 2012, 10:12 AM Reply Like
  • That's the liveliest dead cat I've ever seen ... eheh. It's really taking its time to splatter like it should ... 2012 now estimated to be RED! Amazing!
    26 Oct 2012, 10:22 AM Reply Like
  • Hedge fund bonuses depend on AAPL, GOOG, AMZN, and PCLN. Bernanke to the rescue
    26 Oct 2012, 10:23 AM Reply Like
  • This stock is dangerous.... it's like the NFLX GMCR CMG momo stock that will never die.
    26 Oct 2012, 10:28 AM Reply Like
  • Fundamentally, it's worse than most of those. And it also trades at a higher valuation.
    26 Oct 2012, 10:31 AM Reply Like
  • Jefferies analyst points to the fact that operating margins came in higher than the top end of guidance range, which was for a loss of $50 million. This might make some sense, IF the stock had first gone down in reaction to the greatly reduced guidance at the time it was issued along with Q2 report.


    So to summarize: Q3 guidance issued in July is for operating losses and much worse than expected, but stock goes up; in Q3 they have an operating loss, but lose a little less than expected and the stock goes up some more.


    By this logic they could continue revising outlook down and beating it all the way to bankruptcy.
    26 Oct 2012, 10:39 AM Reply Like
  • Analysts had to drop acid and write fiction, to justify what's going on for the last year, at least.


    Thsi thing went from having expectations for a $5.50 year (back in late 2010) to having a NEGATIVE 2012, and still almost doubled in share price. How much worse can it get? eheh.
    26 Oct 2012, 10:42 AM Reply Like
  • Bubble, bubble, bubble. When does it pop?
    26 Oct 2012, 11:16 AM Reply Like
  • Speaking of analysts writing fiction... I see Mark Mahaney - Amazon drum beater - at Citi was canned over FB IPO.
    26 Oct 2012, 12:18 PM Reply Like
  • I don't think it could..............heck, even if amazon went bankrupt and Bezos said they were closing the doors, I think the stock would jump 1-2%.
    26 Oct 2012, 12:37 PM Reply Like
  • Paulo why no new article on this from you yet?
    26 Oct 2012, 11:16 AM Reply Like
  • I have one waiting to be published, yes.
    26 Oct 2012, 11:22 AM Reply Like
  • I believe Q4 may face a significant headwind, while Q3 was significantly front-loaded, due to CA tax issue. AMZN started collecting CA taxes on 09/15 so a lot of buyers rushed in to buy expensive high margin items in Q3 to beat the deadline. While CA is only 12% of US population, it probably disproportionally contributes to eCommerce (think of all people working in high tech)


    I rushed to buy a laptop from Amazon while in LA just a few days before the taxes took effect.
    26 Oct 2012, 11:21 AM Reply Like
  • I've seen tens of people saying the same - it should be a factor. It should have helped Q3 revs and earnings somewhat, and will now penalize Q4 somewhat. Probably enough to make AMZN miss rev estimates again and lower Q1 2013 guidance as well.
    26 Oct 2012, 11:24 AM Reply Like
  • I am now just as likely to buy computer and electronics components from a competitor like NewEgg as I am from Amazon since there is no tax benefit. Surprisingly, NewEgg beat Amazon on price for many items I was looking to buy. Without a Prime account, there is little motivation to turn to Amazon for all things.
    26 Oct 2012, 03:11 PM Reply Like
  • i personally find it amazing that state Governments want Amazon to collect sales taxes. sure..."gotta start somewhere"...but that's a lot of authority invested in a single company. what happens if they decide to pull out sometime in the future? anywho obviously collecting sales tax is a net positive for Amazon within the California market as other e-tailers will be pressured to leave if they do not follow suit. Moreover if Amazon does continue down the path of "fulfillment services" this could make them a formidable competitor in the distribution business...yet again another large taxpaying service. what don't people want home delivered is probably the question that should be asked? then maybe folks would understand why on the bad news the stock rises. so much money is being put right back into the business...they're creating all new businesses as a consequence. again not recommending the stock...but love the company and how it executes.
    26 Oct 2012, 03:11 PM Reply Like
  • Did you just say that states should be afraid to charge sales tax from Amazon because Amazon might "pull out" and thus not contribute to sales taxes in the future? Really?
    26 Oct 2012, 05:55 PM Reply Like
  • That's as good a thesis as any other ... eheh.


    But for now the "we're investing in the future" thesis is still selling, so they don't need to get more creative.
    26 Oct 2012, 05:57 PM Reply Like
  • I think they also managed the earning as they were running multiple coupon promotions that are attached to a new Prime subscription. In addition, their add-on and changes to subscribe & save would be a net negative even though it should help their margins a bit.
    26 Oct 2012, 12:10 PM Reply Like
  • ... From Bloomberg, another choice quote from Baird analyst Colin Sebastian:


    "The lower-than- expected operating loss signals that the Seattle-based retailer is getting better at managing profit and margins".


    That one really made me laugh. I'd say it signals that they're getting better at managing profit and margin expectations.
    26 Oct 2012, 12:44 PM Reply Like
  • This fucking AMZN, always missing the earnings and always up. Now this bubble reached a P/E of 3.000.
    No way, there are big players with big money that are boosting this bubble.
    26 Oct 2012, 12:49 PM Reply Like
  • I wrote this yesterday, after the AH scam, but I think it bears repeating. Since this seems to be the active thread about AMZN, I figured I would post it here. Would love to get some comments, particularly about the market realization that a Romney win could mean the end of Bernanke and QE Forever.


    I believe AMZN will rally tomorrow, in spite of an awful fundamental report, simply because it is already oversold, and the market trapped new short term shorts in the AH scam.


    All of the technical indicators I look at are oversold. Not to say they can't go even more, but AMZN is both a cartel controlled stock and the poster child for the post bubble Bernanke economy.


    But, I also firmly believe that distribution has begun. The cartel simply can't perpetrate the scam forever, if for no other reason than their antics are being noticed even by the clueless longs.


    Soros getting out last year was the first shot across the bow, and I believe your holdings data may be the second, albeit small flows for now.


    Third, AMZN has really been the buyer of their own stock for the last two years, along with the cartel HFT machines, and they have been financing this stock buying through their own cash flow. Even AMZN now admits that their cash flow is negative, and likely to get worse in the coming quarters. Less cash, less stock buying. Maybe even a forced debt offering coming in the next 4 quarters.


    Finally, the biggest driver of AMZN's valuation and the HFT cartel scam has been the FED easy money policy, near infinite money printing, handed mostly to the cartel controlled banks (GS and others). While the FED is still printing an excess 40 billion a month, I believe the market is just now pricing in a Romney victory.


    While this may have some economic impact at the margin, a Romney victory is certain to end the reign of Bernanke. Probably by this December. The markets are not pricing in that, but are just beginning to. No more Bernanke, much less easy money. Maybe the end of QE Forever. And that is a huge blow not just to AMZN, but all stocks, AAPL included.


    Conclusion: AMZN rallies a bit tomorrow and maybe even up to 240 over the next few days. Then more selling. And this time, in larger chunks.
    26 Oct 2012, 12:52 PM Reply Like
  • Apple Inc. (AAPL), Inc. (AMZN): Earnings Disappoint


    Difference being AMZN is up 3.80% today!
    (AAPL down 2.22%)


    It's a crazy world!
    26 Oct 2012, 01:27 PM Reply Like
  • The loss-making online retailer is either an investor favorite, or part of an elaborate scam.
    26 Oct 2012, 01:32 PM Reply Like
  • Either way, you shouldn't want a part of it as an investor (if you're a long-term guy like myself). When the music stops playing, AMZN stockholders are going to be in for some ugliness.


    (Disclosure: Long WMT since 2007)
    26 Oct 2012, 02:03 PM Reply Like
  • Whats going to make music stop playing for this company though? They already majorly missed their numbers, cut forecasts, trades at 3000+ pe.............etc.


    Even if the company declared chapter 11, the stock would go up.
    26 Oct 2012, 02:10 PM Reply Like
  • eheh


    Your lack of faith is disturbing.


    That's what can doom this company. People losing faith.
    26 Oct 2012, 02:12 PM Reply Like
  • Exactly... Faith.


    If people stop believing in the online retail Hydra that is AMZN, watch its stock price crater to earth. Really that's the only thing that keeps this stock going, the fact that Bezos is trying to transform it into this global "Franken" Retail monster
    26 Oct 2012, 02:16 PM Reply Like
  • "People"?
    Are you sure?
    Methinks, more likely Machines or a tight-knit Cartel.
    26 Oct 2012, 03:02 PM Reply Like
  • the scam could last ten more long did Madoff get away with
    26 Oct 2012, 06:59 PM Reply Like
  • krk:


    I called it last night, and I think it will play out to form. The cartel will move AMZN to 240 or so in the next few days, and then selling will begin in earnest. Likely larger this time, down to 200 before next earnings.
    26 Oct 2012, 03:08 PM Reply Like
  • Brigantine -


    When you predicted Thursday night after Amazon announced earnings that Amazon would rally at that point, I thought you were wrong.


    My initial reaction was to reply to you that I thought you were wrong. But instead of that I read most (or all) of your comments on Amazon. I was impressed with what you wrote.


    So now my question is: where you lucky on Thursday night or are you very good at this game we play.


    As for me I have puts that expire in January, 2015. And even if the stock goes down to the $50 - $80 level now that I believe the stock is worth, I have no where I would want to put that gain, as I also have cash with no where to put it. So for now I am content with letting management pay $240 to buy back their own shares which will make the company worth even less when reality hits.


    Good call....even if it was luck.


    27 Oct 2012, 02:11 PM Reply Like
  • I agree completely with Paulo and have for some time. However since logic and fundamental analysis had failed to result in profits I gave up buying puts. I did trust the "action" on this stock, though. What I did do prior to last quarter and on Wed and Thurs this week is to buy ITM calls. Only 1 last quarter, but 3 this time. And then don't look at the AH activity on Thurs. Sold them this AM for a healthy profit. Missed the top today but I did not want to continue holding AMZN chasing another 1% or 2% because I don't believe it is valued correctly. I was willing to suspend my disbelief long enough to make a buck though...
    26 Oct 2012, 03:08 PM Reply Like
  • Bezos is the Reality Distortion Field.
    26 Oct 2012, 04:06 PM Reply Like
  • whose money is it that's propping or manipulating the price of this stock. It's totally insane. Is it the old hedge fund buddies of Bezo or arrogant fund managers playing poker with very low cards.
    26 Oct 2012, 08:35 PM Reply Like
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