How does this happen? Amazon (AMZN Quote - Cramer on AMZN - Stock Picks) checks in with the news after the close Monday that fourth-quarter sales just skimmed the bottom edge of expectations and gross margins missed estimates. So, it gets pasted with a few downgrades -- then proceeds to trade up 9.6% today.
Amazon announced after the market close yesterday that its sales for the important fourth quarter were $960 million, just over the lip of low projections of $950 million, but a ways away from analysts' expectation of $1 billion. Furthermore, at just under 22%, gross margins just missed Street expectations.
And still Amazon finished up $1.43, or 9.6%, to $16.38
Maybe it's a matter of proving that the worst probably won't happen. Amazon didn't give any reason to believe that it would be desperate for cash real soon or that it couldn't achieve profitability.
The gloom-and-doom naysayers didn't get their proof, said Adria Markus, Internet analyst with
Epoch Partners.
Amazon made improvements in its performance over the past year, Markus said. With operating margins at minus 7%, they were in the mid-range of projections.
Their operating performance was impressive. They're not profitable, of course; that would make it very impressive, Markus said. Her firm has no underwriting relationship with Amazon.
Amazon announced that it had about $1.1 billion in cash. The first-quarter burn rate will be a little higher than most, since it's when retailers have to pay vendors, but the cash cushion alleviates immediate concerns.
Valuation, of course, is still an issue for Amazon, which was trading at $30 just three months ago and is way off a 52-week high of $85.94, especially for those who think it should be trading with its true retailing peers, such as
Wal-Mart (WMT Quote - Cramer on WMT - Stock Picks). As do many other analysts, Markus thinks an unrealistically high growth rate is already priced into Amazon's stock.
2:30 p.m. EST: Nokia's Slowing Cell Phone Sales Rock Some Chipmakers
Nokia's (NOK Quote - Cramer on NOK - Stock Picks) call on slower fourth-quarter cell phone growth was rocking the shares of semiconductor companies active in the booming wireless handset market. And it carries a faint echo of last summer, when unhappy tidings from wireless makers reached out and touched semiconductors.
There is a close relationship: Semiconductors play an integral role in cell phones, from storing numbers to analyzing and digitizing the sound waves.
No semi company plays a bigger role in the market than
Texas Instruments (TXN Quote - Cramer on TXN - Stock Picks), which makes a sizable number of the chips inside cell phones that translate digital signals to analog and vice versa.
Investors' jitters over lowering cell phone sales took TI's stock down 18% during the period from late July to early August after a series of comments by three top cell phone makers: Nokia,
Motorola (MOT Quote - Cramer on MOT - Stock Picks)and
Ericsson (ERICY Quote - Cramer on ERICY - Stock Picks). Today TI's stock again was paying for that closeness, this morning, trading off $2.69, or 5.7%, to $44.31.
So was
RF Microdevices (RFMD Quote - Cramer on RFMD - Stock Picks), which derives the bulk of its revenue from semiconductors for wireless phones. Its stock was trading down $1.42, or 6%, to $22.43.
Chipmaker
Atmel (ATML Quote - Cramer on ATML - Stock Picks), which makes flash memory chips and other wireless phone components, counts Nokia, Ericsson and Motorola as some of its biggest customers. In recent trading Atmel was off 1.7%. Atmel also lost ground during the summer slump, losing more than 23% of its value in late July and early August.
There may be some overkill in the market reaction, said Terry O'Brien of
Branch, Cabell. Nokia's report that it missed estimates by a few million phones doesn't necessarily herald a slowdown in worldwide cell phone demand, he added.
"Here they are saying they're off by a few million phones. But at the end of the month when they report their earnings, if they say instead of 45% growth we're going to be at 20%, that would be significant," O'Brien said. His company has not done recent underwriting for the firms mentioned.
Other makers of flash memory, which stores data after the device's power is off, were not suffering, largely because the market for the chips has expanded beyond cell phones, O'Brien said. Among them,
Advanced Micro Devices (AMD Quote - Cramer on AMD - Stock Picks) was up 3.1% in recent trading. Industry giant
Intel (INTC Quote - Cramer on INTC - Stock Picks), which recently launched a new digital signal processor aimed at the cell phone market with partner
Analog Devices(ADI Quote - Cramer on ADI - Stock Picks), also sells flash. In recent trading Intel was up 43 cents, or 1.4%, to $32.37.
Analog Devices, which also sells chips to European cell phone manufacturer
Siemens, was trading down 0.1%.
John Raess
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