This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Amazon, Priced for Perfection and Beyond

Stocks in this article: WMT BBY AMZN

In the words of Steve jobs, Best Buy (BBY) is declaring thermonuclear war on Amazon this holiday season. Best Buy has publicly declared they will match Amazon's pricing. No easy task considering Amazon margins are brutally low, and Best Buy is more or less writing this holiday off.

Best Buy hopes to end the consumer's psychological bias that Amazon sells the same products for much less. I don't even think Best Buy needs to price match. If they bring it within 2% or less, most consumers won't take a chance and just buy the one in their hand. Of course, that will not chance perception like a full price match will.

Best Buy has its work cut out, but the holiday shopping season is very forgiving, especially if you have the product in stock and ready to walk out the door. The real point is Best Buy will place another chink in the armor of Amazon.

The holiday shopping season for Amazon, like most consumer retailers, is what drives profitability for the entire year. (Amazon is expected to post third-quarter earnings results on Oct. 25. The consensus estimate is for a loss of 8 cents a share.)

TheStreet's Rocco Pendola doesn't share my gloom and doom outlook for Amazon. Rocco and I talk about options almost daily, but a difference in opinion is a good thing and it's what makes a market.

Amazon is a great company, and they have a large part of the Internet locked up. The problem facing investors is that, like a plane crash, even if the odds are small, sooner or later an event will happen.

If Walmart's sales drop 5%, the stock may fall 15% to 20%, and it would certainly cause portfolio pain. If Amazon's sales drop 5% expectantly, and greater competition is cited as the catalyst, Amazon's shares may drop 50% to 60%. At least half the price paid for Amazon is from a relative earnings and sales growth.

Retail has its ups and downs. Using the "greater fool theory" works great until it doesn't. Then the crying begins.

Walmart offers online growth exposure without requiring the thick stomach lining each earnings quarter Amazon requires. Best Buy? I am not ready to buy that one yet in front of price matching and all-out war against Amazon. I like Wamart on dips of three or more down days.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,322.73 -94.12 -0.54%
S&P 500 2,014.52 -6.73 -0.33%
NASDAQ 4,690.71 +7.3030 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs