Amazon.com, Earnings Playbook (AMZN)

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Today’s after-hours trading session is likely going to be a wild ride one way or the other for shares of Amazon.com (NASDAQ:AMZN).  The Internet retailing giant is reporting earnings after the close. Consensus estimates out of First Call put the numbers at $0.15 EPS on revenues of $2.81 Billion.  Bezos and Co. always offer some forward guidance, even if it isn’t known how they come up with it. Forward numbers are as follows: next quarter $0.15 EPS & $3.01 Billion revenues; Fiscal December-2007 $1.01 EPS and $13.85 Billion.

Shares are up more than 50% since its prior earnings blowout last quarter, so this one is coming down to more guesswork and astrology than it would pegging an actual reaction. Logic would dictate that there is phenomenal news priced in now, but our crystal ball isn’t out of the repair shop yet.  Unfortunately the short interest from July hasn’t yet been seen, but shares in the short interest stood at more than 46 million in June.  That will create an additional wild card because ‘short-term’ short sellers either cover on big weakness or cover on strength in a short squeeze.

The stock is also within $4.00 of its recent multi-year highs.  Based on a static snapshot of today’s options prices only, it appears that options traders are bracing for a move of more than $4.00 either way in Amazon.com shares.  This one was listed earlier this month as having much good news already factored in because it seems that the gains will be hard to match, but admittedly this stock will act with a mind of its own and using the term ‘valuation’ here is hard to say if you are anywhere close to a mirror. The stock is also about 10% higher than the consensus price targets from research analysts.

As a reminder, the current quarter is the equivalent of the throw-away quarter of the year, so if rationality and logic can be used for Amazon.com then it will really boil down to guidance.  While Harry Potter’s last book would normally be a point of interest, we already know it is a loss-leader for Amazon.command others so the only read there will be on ‘profitable upsells’ that can be noticed.

Jon C. Ogg
July 24, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.