fbpx

Thinking About Amazon After Cyber Monday?

Thinking about buying Amazon.com (AMZN) stock now that Cyber Monday has passed? Well think again.

When Amazon reported earnings last quarter, its earning estimates got slashed Black Monday style, and investors sent the stock to a 52-week low. Here’s just how bad the news was:

2014 estimate fell from -$0.09 to -$0.78
2015 estimate fell from $1.95 to $0.90
2016 estimate fell from $5.14 to $3.31

It wasn’t long ago when we thought AMZN could earn $10 in 2016. In fact, four quarters ago that estimate was $8.45. Futer profits is what peaked investor interest — that someday Amazon would start making oodles of money. Instead, the company invests in growing its business, so there’s not much (if any) profit hitting the bottom line.

One Year Chart

AMZN_2014_Q4In years past investors didn’t mind buying AMZN even though it weasn’t profiting much. This year they seem fed up. So many broken promises. Now the compnay hasn’t made a profit since 3QtrsAgo and even Estimates look bad. The -71% quarter is the Christmas Holiday Season.

Amazon management hasn’t cared about bringing profits to the bottom line since 2010. In 2011 profits fell and in 2012 they went away all together. But since AMZN stock was high, there was no need to make profits. Investors liked the stock anyway. Now that’s changing.

Fair Value

AMZN_2014_Q4_FVWho knows what AMZN is really worth? I bet a few analysts that go through the reports with a fine tooth comb do. But AMZN management doesn’t give out all the details analysts need. If I put a 50 P/E on this stock I get a $166 price target in two years. But this jugggernaut is worth more than this, I just don’t know how much more.

Sharek’s Take

Amazon.com is a tricky stock to get into. The best course of action is to wait for a big drop and just buy in blindly. It would be nice to think maybe someday the company will start to slow its spending and make real profits (and perhaps dividends) but that doesn’t seem to be the case.

I’ll keep AMZN on my radar, but it doesn’t fit the mold of a stock I invest in.

View the Earnings Table here.
View the Ten Year Chart here.
View the Profit History here.

Leave a Comment

Your email address will not be published. Required fields are marked *

Not a member? Sign up here for $25 a month.