Breakout

Amazon: Buy Shares on an Earnings Miss

Jeff Macke
Breakout

Amazon (AMZN) reports earnings tonight, a somewhat chilling prospect for those long the stock. The world largest online merchant is expected to report earnings of 5-cents on revenues of $15.7 billion. For the full year, analysts currently expect EPS of $1.27 on $74.75 billion.

Spoiler Alert: There's a strong chance Amazon is going to miss estimates. They've missed three of the last four quarters and, as my Yahoo! Finance colleague Mike Santoli suggests, CEO Jeff Bezos wouldn't care if they came up short every 90 days from now until the sun explodes.

"The shareholders should be trained by now," Santoli explains in the attached video. "Fifteen years ago at the IPO, Bezos told you 'we're not managing this thing for earnings.' And they haven't."

The problem for the bears ever since Amazon went public is that Bezos is one of the greatest schemers, if not the best living CEO in corporate history. When it went public Amazon was seen as a rival to Borders and Barnes & Noble (BKS). Suffice it to say Amazon isn't looking over it's shoulder at those two book merchants anymore.


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Shares of Amazon are up 19,829% since the company went public. In terms of the customer experience it's far and away the best major retailer in the world. Coming in a little light on the top and bottom lines hasn't proven to be much of a problem so far.

Here's the trade: Buy Amazon after it misses earnings tonight.

I'm long shares of Amazon. My current cost basis is just under $200. It would be much lower but as Santoli alluded, staying long a company with not much in the way of fundamentals is challenging.

As long as Jeff Bezos is running the company I'm just fine owning it. I'm staying long into the number and rather expect to get crushed tonight. If and when it gaps lower I'll buy more.

I don't want a portfolio of companies as volatile as Amazon, but for my trading dollar it's a stock I need to own. I could be wrong but I haven't been so far.

[At the time of publication Jeff Macke owned shares of Amazon]

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