Amazon.com, Inc. (AMZN) — This company has become the standard by which all other online retailers are measured. But on Oct. 23, Amazon disappointed shareholders with yet another big earnings miss.
Third-quarter revenue rose 20% year over year, but the company posted a quarterly loss of $0.95 per share — its largest in 14 years and worse than the $0.74 expected by analysts. Management also issued cautious guidance for the important holiday quarter.
S&P Capital IQ, which has a “sell” rating on AMZN stock, forecasts a loss of $0.54 per share for the full year versus EPS of $0.59 in 2013. Its analysts expect a significant contraction in operating margins in 2014 due to costs associated with ongoing international expansion and spending on Amazon Web Services, video content and hardware.
AMZN stock is in a bear market with its bearish resistance line at about $340. This line held following a dead cat bounce after the gap down on the poor Q3 earnings report.
On Wednesday, following a failed run at its bearish resistance line, AMZN stock broke its 200-day moving average, confirming a near-term downtrend within a bear market. The breakdown was accompanied by increased volume and a new MACD sell signal.
AMZN stock made a double-bottom at $284 in May and October, and that price appears to be the target for the current decline.
Traders can enter a short sale or bearish options play, keeping in mind the volatile nature of AMZN stock. Short sellers should place a stop-loss order at $342 and check with their broker for any special requirements, including the ability to borrow shares.
