Shorts Sellers Running Scared Before Amazon.com Earnings (AMZN)

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If you have seen the run in Amazon.com (NASDAQ:AMZN) in 2007, you’d think it was 1999.  Shares are up 200% from its 52-week lows, and the short sellers have noticed how stocks of R-I-M, Google, and Apple have all launched on earnings.  These are all part of Jim Cramer’s "New Four Horsemen of Tech" and are all up big in recent weeks and for the year.

Shares are up almost 6% ahead of today’s earnings.  This last quarter is always sort of the throw-away quarter, but the quarter guidance will be covering what should be the largest Amazon quarter ever.  First Call has estimates for this past quarter at $0.18 EPS and $3.14 Billion revenues, and more importantly it has the current quarter ahead estimates at $0.46 EPS on revenues of nearly $5.2 Billion.  In the event we get some business model numbers for 2008, First Call has estimates roughly of $1.55 EPS on $17.6 Billion in revenues.

After you see the individual metrics, you may feel wishy washy on how to call this one.  Analysts as a group are nearly impossible to use for a target reading because price targets are well above and well below the current stock price.  Options trader expectations are hard to peg as well, because on one calculation I derive less than a $5.00 move and one more than an $8.00 move being priced in (shares moved much more in the last two-quarters).  Its chart is also hard to call because shares hit a new high on a gap-up day after being is a solid $89 to $92 range for the last few days.

What is obvious is that this 36.8 million share short interest at the end of September is going to play a major factor, even if the short interest is lower than during the last two reports.  The biggest focus here will be guidance, at least barring anything massive about the last quarter.

Jon C. Ogg
October 23, 2007