Amazon (AMZN) has been on my “stocks to sell” list for a while. One of the biggest reasons is Amazon’s struggle to turn a profit, which has resulted in crumbling sentiment and ultimately underperformance for AMZN stock.
So far in 2014, Amazon stock has lost 14% vs. an 8% gain for the S&P 500 … and investors can expect those declines to continue.
That’s because the latest news about the much-hyped Fire Phone reinforces the bearish case about AMZN stock — namely, that Amazon has foolishly pushed into hardware and is making moves that actually will depress margins further instead of prop them up.
Here’s why Amazon stock stinks right now:
Amazon Fire Phone Flops
The latest nail in the coffin of Amazon includes a report that its Fire Phone efforts have moved about 35,000 units. No, that’s not missing a zero — AMZN has sold a total of thirty-five thousand phones.
By contrast, Apple (AAPL) comfortably sells more than 10 million iPhones each month. Heck, even Microsoft (MSFT) moves a few million Windows Phones per quarter … and when you’re dwarfed by MSFT smartphones, that’s saying something.
Online ads network Chitka came to this figure through some calisthenics, based on the fact that in July, Amazon Fire Phone made up a measly 0.02% of the U.S. market, which boasts about 173 million total users.
Still, even if the figure is way off or there’s a small glitch in the reporting, the idea that the Fire Phone hasn’t yet caught on is both unsurprising and logical based on the lack of interest since the gadget’s late-July launch.
You can bet AMZN stock reports and Amazon CEO Jeff Bezos will be mum on this device. After all, the secretive company has never released any figures to date regarding its Kindle tablets — so why start now?
But based on the reports that are out there and legit estimates from analysts, the Fire Phone seems to be an epic flop for AMZN.
AMZN Stock Banks on New Quirky Projects
If the Fire Phone debacle wasn’t enough, Amazon has embarked on two other weird efforts lately that likely will come to nothing.
The first is a goofy attempt to compete with Google (GOOG) in the online ads market. Aside from the sheer dominance of Google being a problem, it’s important to note that online advertising rates are falling steadily and that anyone who works in the space feels like this is a very challenging market, even for experienced players. The move just doesn’t make much sense.
Secondly, AMZN stock investors were greeted with news this week that Amazon acquired streaming video provider Twitch for nearly $1 billion. There were previous reports that Google was buying Twitch this year, but AMZN beat Google to the punch. Twitch’s service focuses on streaming videos of video games — not allowing viewers to play them, mind you, but simply watch a Twitch channel like a sports spectator. You can perhaps see a way for this to fit into Amazon Instant Video services, but that should hardly be the biggest focus for Amazon’s business as Netflix (NFLX) continues to grow and maintain dominance.
Sell Amazon Stock Now
Look, I’m not saying that Jeff Bezos hasn’t done some great work in the past — or that AMZN stock is going to zero.
But given these weird projects that seem to have a high rate of failure and a low chance of any real profits, the Amazon narrative isn’t going to change anytime soon.
If you’re looking for a company with only revenue growth and no profits, and banking on a long-term speculative bet paying off … well, there simply are better options than Amazon right now.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.