Morgan Stanley's Ever-Changing Bullish Story

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Given the short-term memory the market usually exhibits, few probably remember that on January 7th, a Monday, Morgan Stanley put out a research report dated January 6th where it once again expressed its never-ending bullishness for (NASDAQ:AMZN). The gist of that report was based on's underappreciated international fulfillment infrastructure, and how that was going to drive magical revenue growth into the 29-30% range over several years, leading to revenues as high as $105 billion in 2014, $166 billion in 2016 and $302 billion out in 2020. The small snippet below illustrates the projections for 2013 and 2014 (Source: Morgan Stanley's AMZN report dated January 6 2013).

Fast forward little more than a month. reported its earnings and the most glaring thing about those was the huge revenue growth miss ($1 billion below estimates) as well as weak revenue guidance for Q1 2013 (again, $1 billion below estimates). In a matter of days the previous bullish thesis was completely wiped out. Did Morgan Stanley come out and say anything of the sort, though? Not a chance.

What Morgan Stanley did, was to - obviously enough - create a new story to replace the old one. This brings us to Morgan Stanley's report dated February 13 (today). This report has the new story, the new story consists in lauding the great e-book growth and saying "Kindle sales have overtaken physical book sales and do not show any signs of slowing down". As is customary, while saying this Morgan Stanley predicts a huge slowdown in e-book sales in its own numbers. It's the headline that counts.

But Morgan Stanley also does something else. It revises the numbers pertaining to the previous story. And boy, are those severe revisions we're talking about here. The same snippet regarding 2013 and 2014, reproduced below, takes 2013 revenue estimates from $81.1 billion to $75 billion. 2014 goes from $105.7 billion all the way down to $91.1 billion … but the changes cut even deeper in the out years. 2016 goes from $166.2 billion to $128.6 billion and 2020 goes from $302.5 billion to $211.7 billion! That's a massive 30% cut in revenue estimates for 2020! (Source: Morgan Stanley's AMZN report dated February 13 2013)

It boggles the mind

It boggles the mind how Morgan Stanley can promote a stock at the start of January based on magical revenue estimates, and cut those same revenue estimates by huge, brutal, amounts just one month later without it having any kind of impact on its opinion. And how, without missing a step, a new story is quickly concocted up to keep on promoting the very same stock. Mind you, this is a stock which has been subjected to both massive earnings estimate cuts by Morgan Stanley as well over two years. So now Morgan Stanley is adding massive revenue estimate cuts to massive earnings estimate cuts.

It's like Morgan Stanley is not rating this stock along with every other stock in the market. Instead, here the rules are different and nothing matters and a new story always needs to be made up to continue the endless promotion.


Little more than a month has passed, and Morgan Stanley's "shining Amazon revenue" story is already dead and buried, but no one showed up at the funeral and no obituaries were published in research reports. Instead, massive revenue estimate cuts took place silently in the night and now what matters are e-books.

It would seem that the need to present a bullish story outweighs the need to be realistic about any given story and past stories are quickly forgotten while new ones are made up on the fly.

Disclosure: I am short AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.