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Amazon, the Perfect Short?

The most obvious fact here is that while analysts have said incredible things such as Amazon being "as close to it gets for recession-proof", this company is the poster child for discretionary spending. Retail sales for Germany and UK have dropped as well as today's huge drop in US consumer sentiment (as well as all of its peers reporting lower sales). As I stated, along with new taxes starting on the online retailers for cash-starved states, books, CDs and DVDs are not consumer staples! That is why Wal Mart and Costco are trading better for their ever-increasing selection of consumer staples (they trade for 1/4 of the 2008 P/E multiple of Amazon).

Amazon, the Perfect Short?

Add to these the facts that Amazon's tax free shopping is coming to an end with New York's budget passed yesterday that forces Amazon to collect sales tax for all purchases. Retail Associations have already stated that they will take this to every state. Amazon has also lost market share in the music market, going from 6.7% to 6% in one year (with Apple vaulting to #1, Wal Mart #2, Best Buy #3 and Amazon and Target tied at #4). Add UPS stating that domestic shipments have slowed dramatically with a company that is supposed to increase sales by 35% this quarter in an environment that is the worst for discretionary spending (50% of the revenues are books, CDs and DVDs). Cloud computing has IBM,Google, Yahoo, Microsoft and Emc as competitors. Amazon's Online music has everybody getting into a low margin business. The Kindle isn't even worth talking about as a blip on the revenue meter. I think I will stop for now because it will take too many pages to list the obvious facts here.

High Beta Stocks: Plenty of Risk, Little Reward

Not only does Amazon have a high beta, but is now starting to have headwinds such as states such as New York forcing Amazon to collect taxes, a move that will obviously be copied by all cash-strapped states. Amazon is also losing market share in music and will continue with a tax advantage disappearing. The risk is incrementally greater today!

Amazon Facing Lower E-Commerce Spending - PJ

Piper Jaffray on 1/28/08 reduced their 1st qtr EPS from $0.36 to $0.34 and the price target from $98 to $68 for Amazon. This week Piper reduce earnings again down to $0.30 from $0.34 and the price target goes up from $68 to $74? The full year estimates by Piper for Amazon during this period has also gone from $1.78 down to $1.52 (15% drop in earnings expectations!). It is interesting that over 90% of Amazon's earnings consist of discretionary items such as books, CD's, movies and small electronics. As we enter this consumer-led recession aren't discretionary items the first things that comsumers cut back on (by definition?).

Amazon Facing Lower E-Commerce Spending - PJ

Piper Jaffray on 1/28/08 reduced their 1st qtr EPS from $0.36 to $0.34 and the price target from $98 to $68 for Amazon. This week Piper reduce earnings again down to $0.30 from $0.34 and the price target goes up from $68 to $74? The full year estimates by Piper for Amazon during this period has also gone from $1.78 down to $1.52 (15% drop in earnings expectations!). It is interesting that over 90% of Amazon's sales consist of discretionary items such as books, CD's, movies and small electronics. As we enter this consumer-led recession aren't discretionary items the first things that comsumers cut back on by definition?.