AMZN: Can The Sopranos Save Amazon Stock?

by Robert Martin | May 22, 2014 8:20 am

Amazon (AMZN[1]) stock moved higher yesterday, posting gains of more than 1%. While that won’t turn any heads, it’s a small bit of respite for AMZN considering shares have been battered since the start of the year.

What caused the mini-momentum? Well, The Street was among a few market pundits noting[2] that Amazon stock moved higher as the first HBO shows arrived on its subscription streaming service.

For HBO fans that must know, the first round included the full series of Eastbound & Down, Flight of the Conchords, Six Feet Under, The Sopranos and The Wire. On top of that, select seasons of Boardwalk Empire, Treme and True Blood are also available for streaming through Amazon Instant Prime Video.

And there will be more to come: Any content that’s more than three years old will be available to Amazon Prime members, meaning Girls and Veep will pop up when that mark is hit.

Amazon Stock: A Tough Road

On one hand, this does offer Amazon a nice competitive advantage over Netflix (NFLX[3]), which doesn’t have any HBO shows available to subscribers.

But if it’s a real hindrance to Netflix stock, Wall Street didn’t seem to notice. In fact, shares of NFLX gained more than 5% on the day thanks to the company’s unveiled plans to expand significantly in Europe later this year.

And again, the minuscule gain is far from enough to make us forget the fact that Amazon stock has still had one ugly year. Even tossing in yesterday and a few other recent black days, AMZN stock has lost roughly a quarter of its value since Jan. 1.

That downward trend was thanks in large part to the disappointing Amazon earnings guidance that came along with the company’s recent shrug-worthy results. Amazon stock plummeted a painful 10% in one day as it announced that the loss for the current quarter could reach $455 million — a much different tune than the year-ago quarter, when it posted $79 million in operating profits.

Right after that news, Amazon stock analysts revised their estimates to a consensus of a 5-cent loss per share, and that estimate has dwindled even more to a loss of 13 cents per share. For perspective, analysts were hoping for a 43-cent profit just three months ago.

And don’t be fooled — there’s little chance The Sopranos are going to offset that ugliness.

If you ask InvestorPlace editor Jeff Reeves, the pain is probably going to continue. Why? Well, Amazon stock is still pretty darn overvalued, he wrote recently, Jeff Bezos is chasing fads, the company’s cash burn shows no signs of stopping, and the list goes on and on.

And as he summed it up, “One of the biggest mistakes traders make is confusing a decent product with a good investment.”

With that advice in mind, it’s pretty safe to say that betting on Amazon stock up because of a few new HBO offerings is willfully naive. If you want to go bargain-hunting after the selloff, go for it. But bear in mind that the HBO debuts and other changes to its offerings do little to change the larger picture.

Amazon still is a company growing its revenue, but buying and investing that cash with no regards to the bottom line.

That’s been fine for Amazon stock investors for some time — but many seem to be losing patience.

As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.

Source URL: https://investorplace.com/2014/05/amzn-amazon-stock-hbo/

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