Amazon (AMZN) reports their Q4 results after the close. The options market is implying about an 8.5% one day move, which is shy of the 4 qtr avg of about 9.75%.
Alibaba’s (BABA) disappointing sales for Q4, (while kind of comparing apples to oranges) is likely weighing on sentiment in AMZN today, which was already downright poor. Analyst expect AMZN to report $29.7 billion in sales, up 16% year over year, representing the lowest Q4 year over year sales growth ever. This is obviously a function of the law of large numbers, but what investors seem to be most concerned with AMZN’s inability, or indifference (or maybe both) to turning a profit on almost $30 billion in sales in one quarter!
As most of you are, I am a very happy AMZN customer, and likely will be for life, but as good as it feels to be one of their customers with free shipping and low prices, it has to feel nearly the opposite as an investor as the stock has declined 25% from the all time highs made in early 2014. The two year chart below shows the stock bouncing along what has been a support range for the last 9 months between $280 and $300:
If for any reason the company decided to pull back on spending, and decided to demonstrate their ability to show profit on sales, and leverage from some other investments, then the stock stock would be up 10-15% in an instant, much like Netflix (NFLX) two weeks ago. But if they stay the course, miss the revenue estimate and show an operating profit loss and guide lower, stock will break $280 once and for all, and likely re-test the mid $200s in the coming weeks. The hard thing here is that the company who is responsible to shareholders KNOWS THESE potential outcomes. I am just hard-pressed to think that they could handle their fifth consecutive drop post earnings of greater than 8% (last 4 qtrs: -8.34%, -9.65%, -9.88% and -11%). So what happens?:
I have to think the company pulls a few tricks to be able to tell a slightly different story than that of the last year. So as a trader I am not particularly geeked up to press the short into the print, despite my inclination that we get more of the same. That said, if the stock were to rally on what look like lame reasons, the stock could be a great short on a move back to the downtrend, but I am not holding my breath.