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Amazon Shares Are Due for a Pullback: Kilburg


Amazon (AMZN) reports today after the market close and, as usual, there's a distinct lack of conviction on how to play it — if at all. Officially, analysts are looking for the online kingpins to report EPS of .09 on $16.2 billion in revenue. For the quarter ending June 30, Amazon is expected to earn 22 cents on sales of $16 billion.

Unofficially, estimates mean next to nothing with the world's largest online retailer. If they did, the stock would have been left for dead long ago. The company's trailing operation margin has a 1-handle, the forward P/E is over 70, and Jeff Bezos and Co. openly disregard quarterly results in favor of investments for the long term.

Related: Amazon Is a No-Brainer to Own Long-Term, Says Munster

Lesser companies have been vaporized by Wall Street for the kind of almost-random results Amazon reports quarter after quarter. The difference for Amazon is that Bezos is just so good at what he does. The Kindle was years ahead of its time, a transition away from books into media and general merchandise has been seamless and customers are rabid fans. Amazon just keeps finding places it wants to go and merrily steamrolling anyone in its way.

As a result, Wall Street is willing to forgive the company for almost anything. In the critical fourth quarter, it missed earnings estimates by a full 25% only to see the stock ramp straight in the face of prematurely giddy bears. Next to Best Buy (BBY), the only group more victimized by Amazon's Teflon operation has been the short-selling community.

Can the gang from Seattle do it again tonight? CNBC contributor and KKM Financial founder Jeff Kilburg thinks not. "It's just too rich," opines Kilburg in the attached video. "January 25 they put in that all-time high of $284. Are we going back up there? Why are we going back up there?"

Why? For the same reason the stock got that high in the first place: Traders underestimate Amazon quarter after quarter and load up on shorts, convinced that this will finally be the time the world notices Amazon's hideous margins and disdain for short-term targets. More often than not the ursine crowd is reduced to yelling at their screens in impotent rage as the stock defies their personal logic.

Of course it has been an occasionally bumpy ride for the shares. They are running straight into a nationwide sales tax for online merchants and have to compete with ever-improving online offerings from Target (TGT), Walmart (WMT) and basically every other storefront with a URL.

Taking all this into consideration, Kilburg is content to wait for a dip before committing capital. "You see it go under the 200-day moving average at $250, you see some people get flushed out, and I'll be sitting there at $225."

That's about 17% below where Amazon shares are at the moment, but it's not impossible that Kilburg will get his shot. Given the volatility associated with Amazon's earnings, he may be wise to enter his order now, before the after-hours craziness begins.