Amazon Plunges as E-Commerce Optimism Washes Away

The way investors have reacted to Amazon.com's (AMZN Quote) shares lately, you'd think the online bookseller was mugging little kids for those Harry Potter books rather then FedExing them free.

A passel of bad news, including the departure of President and COO Joe Galli, a host of downgrades by some of its breathier sell-side fans and a disappointing earnings report, has taken most of the blame for the 26% flensing of Amazon shares this week. (TheStreet.com explored those issues in a story Wednesday.) But beyond the so-called logic of the selloff lie some less quantifiable, largely emotional, factors. And just as outsize hope drove the stock in its glorious heyday, now deep, dark fear appears ready to drive Amazon along a trail of tears.

Coming to Grips

First off, there's the fear that the company will never make money. Its second-quarter loss, counting the losses associated with investments in companies like Pets.com (IPET Quote) and Drugstore.com (DSCM Quote), widened to $317 million, or 91 cents a share, from $138 million, or 43 cents, a year ago. (Excluding those losses, Amazon's loss widened to 33 cents a share from 26 cents, about 2 cents better than analysts had expected.) ...