AMZN Stock Still Is Doomed – Sell Amazon

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Amazon (AMZN) has been a stock I’ve been warning investors about for a while, including here, here and here.

amzn stock amazonThe short version of why I’m bearish on Amazon stock includes the notion that profits are nowhere to be seen and AMZN continues to embark on money-losing efforts anyway.

AMZN stock is down 17% so far in 2014 despite about 8% in profits for the S&P 500 Index in the same period, and I fully expect the pain to continue for Amazon through the end of the year.

My reasons aren’t new, but worth repeating: Amazon is overvalued on its meager profits and is doing nothing to change that narrative in the eyes of investors.

Here’s why you should continue to avoid AMZN stock for the rest of the year.

Amazon Fire Phone Fizzles

The fizzling out of the much-hyped Fire Phone reinforces the bearish case about AMZN stock in many ways.

For starters, it shows a lack of focus on profitability as Amazon foolishly pushed into the low-margin hardware space. It has long been known that Apple (AAPL) and Samsung (SSNLF) are the only companies that can make a profit on hardware, with the two companies literally accounting for the entirety of smartphone profits in Q2. Why would Amazon get into that mess?

And besides the simple challenge of profitability, AMZN stock also has suffered as Jeff Bezos & Co. grossly overestimated user adoption. Amazon Fire Phone sales have been abysmal, according to reports, and AMZN has slashed the price to a mere 99 cents thanks to miserable initial sales.

The Fire Phone itself will be forgettable, but the damage won’t be — particularly as to what the misstep means for confidence in AMZN stock.

AMZN Stock Sentiment Stinks

AMZN stock has been in a death spiral this year, largely because investors have stopped bidding up the tech giant on hopes of profits “later” and have started to demand something substantive in the here and now.

Given the move with the Fire Phone — and with the Fire TV gadget and a buyout of video game-watching service Twitch and its venture into online ads, among others — it’s clear that Bezos isn’t interested in changing that narrative.

Amazon is destined to struggle as the company continues to stumble along with the status quo as a result.

I mean, when the current trajectory of AMZN stock is down in an up market, and when the current take on your hardware is that it’s inferior to the alternatives … shouldn’t you do something different?

As long as Amazon keeps this up, AMZN stock will keep up its declines too. And there’s no sign of a strategy shift anytime in the near future.

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 editor@investorplace.com or follow him on Twitter via @JeffReevesIP


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