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 Stock Is Worth Every Penny

Stock quotes in this article: AMZN

NEW YORK (TheStreet) -- Amazon (AMZN) is bigger than the Federal Reserve, and about as controversial.

Once the Fed began its aggressive bond-buying program, or "QE," many investors starting fearing an equity "bubble" and insisted it was going to pop at any moment. Investors who initiated a short position in the S&P 500 at the start of the year have lost 23% in 2013 so far. Over the past three years the index has risen 48% and over the past five years it's up 86%. 

Moral: Don't fight the Fed. Same with Amazon CEO Jeff Bezos.

Yes, there are scary things about the company. It produces no profit and in most cases losses money from quarter to quarter. Expenses continue to rise, revenue per employee continues to drop and the valuation is literally astronomical. 

So yes, there are good reasons to avoid buying the stock, especially at levels that make value investors scoff and perhaps gag a bit.

But Jeff Bezos' company is simply not a name to short. Unlike the S&P 500, which is up 23% for the year to date and some 80% or so over the past five years, Amazon is up 43% in 2013 and 635% from five years ago, including the post-earnings pop from Thursday night. 

A Fed-rebelling short position in the S&P 500 would hurt if it were initiated and never lifted from 2009 until now, but stacking your chips against Bezos & Co. would have proved suicidal. 

Most recently, the premiere e-commerce retailer delivered a third-quarter earnings loss of 9 cents per share on $17.1 billion in revenue -- the latter of which is clearly most important to investors. 

Amazon has struggled to drive profits and is willing to sell devices such as the Kindle for a loss in order to drive future sales of its services, content and products. 

But whether you think that's right or not doesn't matter. The market doesn't care about Amazon's inability to produce a profit for now. One day, that'll matter. Right now it doesn't and the stock wants to go higher. 

Investors care about sales, which in this latest quarter grew a robust 24% from the same period last year. Operating cash-flow also increased sharply, up 48% from the previous year. 

Amazon is still cruising higher and the shorts should take notice because their positions are getting toasted otherwise. It seems like every pullback is just a bear trap, as the stock goes on to rally sharply in the coming weeks and months.

Unfortunately for the bears, they have to either be extremely skilled and disciplined when shorting, or very patient. 

They can look to short when the company fails to grow year-over-year sales coupled with quarterly net losses, sentiment begins to change and the uptrend breaks down. 

Otherwise, it's just frustration, losses and financial suicide. If the stock actually starts to tumble, you'll have plenty of chances to press it on the downside. Until then, stay out of Bezos' way. 

At the time of publication, the author had no position in any stocks mentioned.

-- Written by Bret Kenwell in Petoskey, Mich.

Follow on Twitter and become a fan on Facebook.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!
DOW 16,787.33 -17.38 -0.10%
S&P 500 1,939.10 -7.06 -0.36%
NASDAQ 4,410.3940 -11.6910 -0.26%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

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