>>>I'd like to hear from Longs (using fundamental analysis) why this stock should be $39<<<
Let me ask you one question. If the stock price is based on fundamentsls, why did AMZN go above $40 in the first place?
It went up because somebody who is controlling the price made it go up.
Likewise, they decided to drive AMZN down in the last two days.
The stock price is not determined by us, retail "investors."
>>>I shorted 10000 shr at 46.50<<<
So, one-dollar move on AMZN can increase/decrease your paper profit by $10,000.
If AMZN bounces $2, then you lose $20,000. If you just hold your short postion on AMZN in the next few weeks and AMZN remains range-bound at this level (around 40), then we must conclude your shorting on the day of earnings release was pure luck.
Further, significant down moves are unlikely in the short-term. A bounce is more likely. A bounce big enough to make shorts regret not covering yesterday or today, that is. The bounce will be big enough to make some shorts who think now they won't cover until AMZN reaches mid 30s or even lower cover.
We shall see.
Let me add a little more fuel for thought:
According to Yahoo statistics based upon today's stock price:
Walmart PE ratio = 18
Amazon PE ratio = 31
This means AMZN is trading at a 72% premium to WMT.
Shareholder Equity for WMT = $49.3B
Shareholder Equity for AMZN = <$.227B>
If AMZN gets equivalent valuation of other large retailers, it would probably be trading below $10.
I'd like to hear from Longs (using fundamental analysis) why this stock should be $39
Let's have an intelligent discussion. I've made my argument for why it should trade much lower. What's your reasoning?
I studied AMZN before I shorted. Here are the facts I saw:
1. AMZN's line of business is retailing discretionary items to consumers.
2. What is happening to that industry? Answer: down a lot. Last weekend, I checked performance of over 20 retailers' stocks (both E- and Bricks+Mortar). All were hurt since July-August. Not most--ALL.
3. Ebay had big profit and sales increases. Guidance said both will rise. But Ebay was down significantly. Why? Same reason as all others: lower expectations.
4. Gas prices are eroding consumer budgets.
5. Heating oil and natural gas: even worse than #4. Also, some driving is discretionary. Heating is much less so. Fuel will put a serious crimp on personal spending.
6. Hurricanes. Each has had mainly local effects--but together, they add up to a lot of lost customers.
7. Delivery costs, part 1: they are actually a bigger part of unit cost for an e-tailer than retail rent is for a bricks-and-mortar retailer. More important, shipping/handling does not decrease much per unit as sales rise, as rent does. Implication: the business model has inherent problems.
8. Delivery costs, Part 2: UPS fuel surcharges. A squeeze on prices.
9. Interest rates are rising. AMZN is all credit card sales. A squeeze on prices, profits.
10. AMZN financial guidance said profits might be up 8 cents, or down 9 cents next year. The wording was a euphemism for "down."
11. Competition. The growth of Google usage is dangerous for AMZN. Why? Shop for a product on Google, and ads for shopping-comparison sites send buyers away from Amazon to price-cutting competitors.
12. The "Harry Potter Effect." AMZN boosted sales at zero profit, spending too much on promotions and cutting the price $4 below Barnes & Noble on line. $40 million worth of loss leader sales. A dumb move.
13. The conference board consumer confidence survey the other day. Expected to rise, it went down. Implies a troubled shopping season coming up.
14. Similarly: the International Council of Shopping Centers has a press release on its web site saying it expects holiday season shopping to be UP 3.5%, compared to a 2.3% increase last year. Sounds great, doesn't it?
But it's a fib. This same organization, in its most recent monthly survey of consumers, found that 60% plan to cut back on discretionary spending. That's the highest figure ever. In September, 54% said they were cutting back. Prior high was in August, 59%.
15. Charts tell me $37+ is next, and the predictable range for AMZN is $42+ resistance, under $34 support. It could go lower. Given all the above, who would pay more than $39 now?
If there is no reason to expect a stock to rise, it will fall, because no one will have a reason to hold it.
16. Significant offsetting outside trends and influences: none of any importance. This was the most difficult part of my analysis before I went short: wracking my brain, asking, "What could undermine the analysis above?" I can't find anything.
William O'Neill, author of "How To Make Money IN Stocks," says the single most important factor in the value of a stock is rising profit margins. Lower profit margins = lower stock price, period.
Argue that point with O'Neill if you want. It's your money.
My cordial, respectful advice: sell NOW. Tonight, AH, if you can.
A lot of big institutional investors are in at around $38. They tend to decide a little more slowly than most when it comes to dumping a stock. For example, look at the 3-day delay between Ebay earnings and the second half of the Ebay selloff last week.
In other words, you have time to sell before the stock price falls another $6 or more.
Of course, as I said, it's your money, and the above analysis is just one opinion.
MSFT disappointing earnings and/or outlook?
Bode well with AMZN. AMZN will shoot up if the whole market is lackluster.
Today, the whole market went down too much. Too scary. What we need is a boring market so that AMZN shooting up attracts attention. Tomorrow we may get that kind of day.