It is my contention that AMZN is a growth stock deceleration party and everyone is invited. As a growth stock manager the key to winning is to avoid fading growth stocks. I have previously articulated why I think this stock is a short. Since then we have some new data to digest. Lets go over the points:
1) The CFO announced his retirement: a huge red flag for me and as a rule, when I was a PM, I would trim or sell on this news. No one leaves a gig like this unless you don’t want to be around to clean up the mess.
2) Overall retail sales have deteriorated.
3) BABA is now a comp with actual profits.
4) They received a $2 billion line of credit from a bank a few months ago. Cash flow issues around the corner?
5) GOOG lowered their cloud service pricing again a few weeks ago. AWS is an awful commodity business that many seem to think has value. Check out RAX chart. AWS growth requires lots of capex and cash.
6) Their Fire Phone is a flop and likely burned a lot of cash as well.
7) The chart is telling you that something is very wrong.
8) My wife just ordered a bunk bed for $299.00 with two day free shipping to Hawaii. How much does it cost to ship a bunk bed to Hawaii via an airplane? This is anecdotal but you get my point.
Bottom line: I think we see cash flow problems and losses continue here as Bezos is stubborn and thinks investors will continue to give him a pass for profitless growth. I am guessing Bezos has not been listening to the CFO and that is why the CFO is leaving.
I have purchased a very short term put as of today to express this view point. The stock market has not been as kind to fundamental misses these days. The company reports tomorrow night after the close. This is typically a very strong seasonal time for this stock so I could be completely wrong. Somehow I don’t think I will.
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Is the Bounce over? Please don’t leave us in the dark. Thanks Susan
Susan,
Yes I belive so. I will post later. Running errands for the love of my life.
What is going on with your Apple short, did you sell it on their dip before earnings?
Flyaway18,
I covered all shorts as written in my Bounce note. Still a short. Peak margins. Blow out q and that’s it on price action? The stock is singing to me.
Glad to hear you reloaded the put, I had been curious. And appreciate your perspective on interpreting some of these events. Thanks for the update
BlueStar I bought some 285s expiring Friday last week and averaged down today. I’m probably going to get a decent size position in the November’s as well. I think if it sells off for the reasons you posted then it will be a rather large move. 10%+ is very doable. It’s quite easy to imagine a move down to 270, which would take out this year’s lows. There should be decent support around there. If we start to lose the 260-270 area you get to 225 very quickly.
Quality control,
I am involved in 10/31 300 strike. If I am right we get a move down bigger than 10%. I am playing for 15-20% down move. The character of the market is much different now. Yelp is getting slapped silly for a $2mm light guide.
Yeah I think any strike above 285 is probably money, if the move down plays out like we’re betting on. I went with a riskier strike and less time, playing for that move to 270 at least. But like I said I’m going to get some more time on the 2nd half of my trade.
Nice call on the move back to 315 btw, you had that nailed.
I am slapping myself silly for not playing YELP earnings. I got very busy with work this week and completely forgot to get my bets in. That was such an easy call too. There will be plenty more opportunities like that though.
I think Pandora will have more downside than Amazon will. Wouldn’t surprise me to see a 20-25% decline after earnings. Spotify and Apple Radio are killing P single handidly. Guarentee they lost subs this quarter
Danny1980,
I go with what I know. Thanks for the tip. I will look into it.
I might try some P Nov 20s for around $0.60 as a lotto. The volume structure looks great below $18.50. I would target $15.
Take it easy guys.The worm can turn
pretty quick.Lots of financial wiggle room
available to these co’s
re the am green-green futes – ah, the joys of being short in an officially-sanctioned long-only ! 😮
gorby,
we are talking about high priced growth stocks that burn cash. Market will punish those that miss slightly.
juice,
POMOS are ending soon.
BlueStar:
You have an ability to see through
their B.S.
I want to be less of a muppet.
Amazon is bad for the economy and jobs. Amazon is a job killer 10 times worse than Walmart. For every ten $20 jobs Amazon kill they create one $11 job. Small cities around the country are losing their small business, jobs and tax revenue that goes with it. Amazon is now 21% of UPS business. One day Amazon will open their own delivery service and take out USPS, FDX and UPS. They are shaking in their pants. Bezos got evil plans.
vegas treader,
I forgot to mention that UPS and fed ex are jacking AMZN around.
Gorby,
I have a good nose for bullshit. having said that never short in front of a good chart. Chart on AMZN is telling me to take a shot. I could be wrong in the short term. AMZN fundamentals have been deteriorating since 2013 but stock was up 60% in 2013. Remember to marry both fundamentals with price action on shorts.
Feed back so far is that sentiment is already negative. I know that. I am betting its worse than the negative sentiment. As always I could be wrong in the short term. long term i think this will continue to be a disaster relative to the market.
Added 2nd half of my AMZN short via next week’s 285 puts for $3.80. I’m on this week and next week’s 285 puts.
Danny1980 I took a shot at P via Nov 22 puts. I think it could be a tough environment here for P as well.
Good luck all!
great call bluestar – congrats
Hat tip good sir!
Great call.
well done sir
Great call Blue. I know people love the macro noise that you post, but I think poss/ideas/pitches like this are much more interesting, and clearly more value added. Great call, nailed this one at least so far in AH trading.
Anything can happen, but this is a good reaction so far. Would love to hear your take on the quarter when you get a chance. Hat tip to you sir.
So now that this cat is out of the bag do we see institutional selling for the next week as funds re-balance before 31 Oct?
Initial reaction,
Need to listen to call but this is… well how do I put this…..a shit show. more after call.
You won! P only down 4%. They were pretty much in line with estimates. I covered my short position. Really thought they would implode
Outstanding call Blue. My account and I are very appreciative.
i grabbed a small $$ amount of $300 puts to scratch my bear itch that’s been neglected for a few years. Thanks Blue…you’re my boy.
nice call
Nicely done sir.
Not just Amazon, I am forever puzzled how even average Joe afford free shipping on eBay…
Credit where credit is due – Amazing call.
When your hot your hot.
Can you throw a ball .Everybody needs a good QB
Mr P do you still think that the market will push to that 1980 level, or do u think that 1960 was all she wrote. Blue, AMZN should give us our nice downtrend again for the overall market? Great call on the couple of days for the bounce and AMZN…i so dislike bounces.
TN
Do you think that NYC Dr. has real Ebola?
Too many variables to set targets, but 1980 if he has no Ebola and 1918 if he does, I know sounds silly but this market is , nothing more or less.. very reactive.
Hi BlueStar Do you think this is the same as the April fake out where you saw it coming but then the dodge?
Mr. P, Market really should be looking at China Thermal Coal imports, etc…such a silly market.
Blue. Nice call on AMZN!
TN,
you got your answer now, guy got Ebola.
Poor Guy.
Kudos
To all,
Thanks for all your praise. I think we can assume that the market character is changing. Companies that don’t earn money but have high revenue growth and high valuations are being punished if they disappoint. In a non QE world I would suggest culling all these socks from your portfolios and look to short on strength. Now that QE is ending what worked well before will now be the opposite.