Sell Amazon (AMZN)
From Cabot Growth Investor
Updated from WSBI 776, December 16, 2015
Amazon (AMZN) Amazon’s correction was looking relatively normal through the market’s first low (January 20), but a so-so earnings report and a bludgeoning of all growth stocks caused the stock to crater and forced us to sell our remaining shares. On the business side, everything is on track; e-commerce and cloud computing revenues generally topped expectations for the fourth
quarter and the outlook was solid. But Amazon’s old spending bugaboo reared its head again—earnings missed expectations by a mile, and analysts cut their 2016 earnings outlooks from about $5.50 per share this year to $4.50. While that would still be a huge rise from 2015, the larger point is that the quarter brought back fears that management would continue to spend heavily for the future—a phase most big investors thought was in the past.
The recent drop took the stock well below its 200-day line and took shares 32% down from their all-time high. Even if a new bull phase begins right here (which we’re not anticipating), it’s likely AMZN will need a few months to build a new launching pad and to prove that spending growth isn’t set to return to 2011 to 2014 levels (via a solid earnings report in April). If you still own shares, we think the recent bounce provides a good opportunity to sell.
Michael Cintolo, Cabot Growth Investor, www.cabot.net, 978-745-5532, February 17, 2016