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Bear of the Day: Amazon (AMZN)

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The good news in the Amazon AMZN quarterly report was a 10% earnings beat and year-over-year revenue growth that was still very enviable with +24% overall and +47% for AWS (Amazon Web Services).

The bad news in the report was that even these terrific sales numbers were below Wall Street expectations.

And the guidance for the current quarter doesn't get any more optimistic. That's why the stock was down 3.5% on Friday -- on more than 2.5X the normal volume -- and why it will probably trade under $800 as many analysts lower their earnings estimates and price targets.

Zacks Rank Strikes Again

But the stock was already in the cellar of the Zacks Rank going into the report because analysts were busy lowering estimates in the past few weeks.

30 days ago, the full year EPS projection for 2017 was $9.19. By late last week, even before we heard from the company on February 2, that profit picture had dropped to $8.88.

You can expect that consensus to drop further as all the estimates filter in this week to the Zacks Rank.

And 2018 estimates had already taken a bigger hit in the last month prior to Thursday's report, dropping roughly a dollar from the $14.98 consensus a few weeks ago.

Expect those projections to probably get reeled in a little further too.

Expenses and Growth

Last Monday January 30, both AMZN and Alphabet (GOOGL - Free Report) were trading around $825 and I made a small bet with another investor about which stock would get to $1,000 first. I'm still glad I picked Amazon, but the race is still certainly too close to call.

Long-term, Amazon is likely still a fantastic investment as they recreate the categories of retail shopping, online and off, and exploit a major presence in cloud services with their deep connections in global enterprise commerce.

But near term, they continue with a philosophy that has worked, namely, re-investing in their businesses. And that strategy is likely to slow down the pace toward Susquehanna International Group's super-optimistic price target of $1,250.

Which means Alphabet is now the favorite again in the race to $1,000.

Keep your eye on the Zacks Rank for the turn in AMZN shares.

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