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  • ex.goldbug ex.goldbug Apr 29, 2013 9:21 PM Flag

    The Size of Past Amazon Corrections--how far could the stock correct?

    To see what the downside potential might be, I've looked at previous corrections/bear markets in the stock price of Amazon. From worst to most mild:

    1. early 2000 to 2002: $115 to $10, -91%

    2. 2003 to 2007: $60 to $30, -50%

    3. late 2011: $245 to $170, -30.5%

    4. mid 2010: $150 to $105, -30%

    5. late 2012: $260 to $220 ($205 after hrs trading): -15% or -21% after hours

    6. early 2011: $180 to $155: -14%

    The range of declines is 14% to 91%, with a mean decline of 39%.

    The past is not an exact portent of the future, but it can provide guidelines.

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    • Margins declined significantly - from 34% to 22%. This stock was in the stratosphere because of hopes of future margin expansion. It did not pan out - hence the decline. This could go down to be a sub-100 dollar stock. Keep your STOP LOSS orders active.

      Sentiment: Sell

    • An average decline of 39% off the recent high of $285 would take the stock to the $173 level.

      • 3 Replies to ex.goldbug
      • 200 is a given...there is no driver to bounce this stock. Once the trust has been lost, it will be hard to regain...I think AMZN has lost its credibility.

      • xgoldbug, with all that work u did which I appreciate
        How long did these drops take, average number of trading days etc.?

      • The environment is far worse now for Amazon.

        1) No longer the king of e-books. They have to sell Kindle's at a loss now just to not lose share faster than they are.
        2) Internet tax is coming. Not only will this hurt sales, it will be expensive for Amazon to implement this.
        3) Brick and mortar retailers are getting smarter. They are willing to price match. That coupled with sales tax no longer being a benefit, people will buy the big ticket items with higher margins locally than risk getting a smashed tv box on their doorstep.
        4) Cloud competition is coming fast and prices are going to drop fast.

        All in all, Amazon has zero pricing power anymore. They couldn't make a profit before, forget it now.
        Wait until they try to get into cellphones, that will increase the loss. I think institutions are starting to see the writing on the wall and don't want to be last to get out. Why hold Amazon that still can't make a profit with sales slowing dramatically when you could buy Apple or Google with real balance sheets and low p/e's.

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