For three of the last four quarters, the market reaction to earnings from Amazon.com, Inc. (NASDAQ:AMZN) has been a disappointment. After last year’s Christmas earnings were released, Amazon stock dropped below $500 per share. After the March earnings came out, you could get it for about $600. September’s numbers took it off its all-time high of $835 to a low below $720.
Yet earnings estimates for the quarter that ended in December are not extreme. Beating the consensus earnings estimate of $1.46 per share would not be a record — earnings were $1.77 per share in June. It’s the top-line that should stand out — $44.77 billion would top last Christmas’ record of $35.7 billion in revenue by 25%. The estimated yearly handle of $136.7 billion would top last year’s figure by more than 25%.
That’s what you’re buying with Amazon stock: big growth in big numbers.
AMZN: Killing It on Christmas
By all accounts, Amazon killed it over Christmas. Almost before the tinsel came down, Macy’s Inc (NYSE:M) said it would close 68 stores and lay-off more than 10,000 workers. Kohl’s Corporation (NYSE:KSS) cut its earnings forecast and other retailers were “slaughtered.”
Slice Intelligence estimates AMZN got half the last-minute Christmas traffic and Morgan Stanley estimates Amazon has sold over 11 million of its Echo voice-command devices before December. The $50 Fire tablet sold out.
The good news may have just started. Fire tablets are going to sell more Prime memberships, and those memberships are even-more valuable with a new credit card offering 5% cash back on Amazon purchases.
I know that in my house, I don’t have time to see all the new Amazon shows that come with Prime. The $99 per year Prime Unlimited book offer keeps the family occupied. An Amazon “shopping cart” that used to be prime for abandonment is now a placeholder. I go offline and come back when I want to add enough for free shipping instead. The company’s ad of a priest and imam buying each other lime green kneepads went viral.
Oh, and did you see the Oscar nominations this week? Manchester by the Sea drew six nominations, including Best Picture. The studio? Amazon.com.
Amazon Stock: No Bears Left
The worst thing I can say about AMZN stock today is that it has nearly extinguished the bearish analysts who used to moan that it made no money and that it was a Ponzi scheme.
The worst thing you can say was said by Morgan Stanley analyst Brian Nowak. Amazon is starting another investment cycle. This will cut into profits.
I remember debating those people, loud and long, until I finally listened to my own arguments and bought some Amazon shares, at about $330 each. Now, at nearly $830, they represent a huge portion of my retirement portfolio. Jeff Bezos is literally paying for my old age.
Were it not for InvestorPlace Contributor Chris Tyler, I would be worried. Chris is a technical analyst and, since he made his call on Jan. 3, the shares are up nearly 10%. As Scooby-Doo would say, “ruh-roh.”
It’s when everyone is bullish that it’s time to be bearish. The Dot-Com bubble of 2000 happened because there were no more buyers left — everyone was in the market.
For those of us who have ridden this bull for several years, then, it might be time to take some profits on Amazon stock. Don’t wait for earnings. Someone will find a reason to sell AMZN stock after earnings and, even if they don’t, I didn’t say sell out your position.
Just take a little something off the table. Enjoy your profit. Buy something from Amazon — Valentine’s Day is coming.
Dana Blankenhorn is a financial and technology journalist. He is the author of the sci-fi novella Into the Cloud, available at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in AMZN.