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Bear Of The Day: Amazon (AMZN)

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The world’s most powerful retailer is just coming off a super strong “Prime Day” yet analysts were trimming estimates.  The lower estimates for Amazon (AMZN - Free Report) has made the stock a Zacks Rank #5 (Strong Sell) and I thought it would be a good idea to show why this stock is a “Strong Sell” in this Bear of the Day article.

I’m A Customer And A Fan

I love Amazon.  I made a somewhat "life changing" trade off the stock a few years back (34 Million Reasons Amazon Will Beat Earnings) where I bought some calls that were at least 10% out of the money with three weeks to go before earnings.  I crushed it that time and played the next two earnings in a similar fashion.  The gain on the next trade wasn’t even close to the first one.  The third trade was a 100% loser as those options expired worthless.

I am also a fan of Amazon, I have an Echo and a Dot and I have been a Prime member for a few years now.  I order everything but food (and I have tried pantry) from AMZN, so I am a fan of the service.

So Why the Bear

Amazon is the Bear of the Day because it is a Zacks Rank #5 (Strong Sell) – and that basically means that the sell-side analysts that cover the stock have been lowering their estimates on the stock. 

The Zacks Consensus Estimate for the current quarter has been falling.  The number was $1.66 90 days ago, but it fell to $1.40 60 days ago and is now at $1.36.  That is a big drop, and it is reflected in the 2017 estimate which fell from $7.03 to $6.49 over the same time period.

Rank Vs My Outlook

With the recent acquisition of WFM, the company may see some extra spending in the coming quarters.  That clearly has put some pressure on the analyst's models, but at the end of the day, AMZN is just going to get stronger.  The reaction in other stocks on the news of the WFM deal was really telling, as stocks like Kroger (KR - Free Report) , which had fallen significantly the day before dropped another 20%.

While estimates are falling, the end idea is that I would want to own AMZN instead of selling it here.  That said, I do have some concerns about the coming quarter as analysts have been lowering numbers.

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