Kass: A Troubling Stat for Amazon

This blog post from Doug Kass was originally published on RealMoney Silver earlier today.

Yesterday I remarked that Amazon waxed too enthusiastic in its Dec. 26 release regarding its "best ever" sales claim.

My friend/buddy/pal, Jeff "J-Matt" Matthews objected more eloquently on his blog Wednesday. As J-Matt dutifully reported, Amazon's release looked conspicuously like the previous five December announcements:

• 12/26/2007: Amazon Wraps Up Its 13th Holiday With Best Season Ever
• 12/26/2006: Amazon.com's 12th Holiday Season is Best Ever
• 12/26/2005: Amazon.com, Inc. today announced that the 2005 holiday season finished as its best ever
• 12/27/2004: Amazon.com's Tenth Holiday Season is Best Ever
• 12/26/2003: Amazon.com Wraps Up Its Ninth Holiday With Busiest Season Ever
• 12/26/2002: Amazon.com today announced it has finished its busiest holiday season ever

Makes me say ... hmmmm.

That said, I pulled a far more interesting metric out of Wednesday's best-ever sales release that prompted me to short the stock late Thursday.

Although the company did not report total holiday shopping figures, it did state that "Amazon's shipping peak (Dec. 10) saw 3.9 million packages packages shipped to more than 200 countries."

From there I compared the peak shipping days' units sold that were mentioned in the previous three Amazon holiday "best ever" December holiday releases.

Surprisingly, the 3.9 million units shipped during the peak shipping day in December 2007 was up by only 14.7% compared with the 3.4 million units shipped during the peak shipping day in December 2006. This is a sharp deceleration in the rate of growth from the December 2006 over December 2005 gain of 25.9%, and from the December 2005 over December 2004 gain of 35.1%

Despite the clearly slowing rate of growth in units sold during peak shipping days over the last three years, Amazon is still flying high -- and trading rich.

Its shares have leaped 142% in 2007, and at $94 a share trade at a bloated 84 times estimated 2007 earnings and at 58 times 2008 consensus forecasts; its market value stands at nearly 3 times sales; its enterprise value (equity valuation plus debt) sits at 47 times cash flow; Amazon's PEG ratio (price-earnings multiple divided by projected five-year growth rate) is a lofty 3.5 times; and its book value is 1 cent per share.

Amazon's shares appears primed for a fall -- and apparently insiders agree. During the last six months, the company's management has sold over 1.1 million shares and purchased none.