Amazon.com's Delight-O-Meter was whirling at record pace this holiday season, but the company's record sales weren't enough to convince some investors to stick with its stock.

Amazon ( AMZN) shares fell $1.51, or 7.4%, to $18.79 in afternoon trading on Friday. The selloff marked the second-straight day that Amazon shares fell more than 7%, with the volume of shares traded each day more than doubling the daily average for the month.

Analysts attributed the selloff to profit-taking, disappointing sales for the retail industry as a whole and e-commerce sales that weren't as high as expected -- or as high as investors might have hoped. Additionally, Forbes.com reported Thursday that Professional Timing Service, an investment newsletter, has recommended that investors short Amazon shares.

"We're almost seeing a reversal of momentum for Amazon," said Safa Rashtchy, who covers the company for U.S. Bancorp Piper Jaffray. (Piper Jaffray does not have any investment banking business with Amazon.)

Amazon shares have done well overall this year, climbing more than 75% in the year to date. The company's shares peaked at $25 a share earlier this month.

Investors, especially institutional investors, may be trying to lock in some of the gains they've seen in Amazon before the year closes, said Steve Weinstein, who covers Amazon for Pacific Crest Securities.

"It's been a tough year to be a portfolio manager," Weinstein said. (Pacific Crest does not have any investment banking business with Amazon.)

But the company's stock performance has given rise to increasing questions about valuation. Amazon, which has posted a profit on a quarterly basis only once and never on a yearly basis, is currently trading at 169 times projected 2002 earnings and 85 times its projected 2003 earnings, according to Thomson Financial/First Call. Amazon's price to 2002 earnings ratio is twice that of e-commerce rival eBay ( EBAY), which has consistently posted profits and higher revenue growth than Amazon.

"We're still expecting a fairly solid quarter out of Amazon, but probably not strong enough to justify a stock price in the $20s," Weinstein said. "Part of what we're seeing is investors trying to get to a better valuation."

Amazon's valuation and stock price prompted the short recommendation from Professional Timing Service. Based on Professional Timing's stock market models, Amazon shares seemed to be heading for a fall, said Curt Hesler, the newsletter's owner and publisher. Amazon shares could fall back to around $12 a share, where they were trading in July, before the recent surge in the company's share price.

"If the market got really nasty, there wouldn't be any reason for it not to fall even lower ," Hesler said. "This is a stock that's been out of sync with the rest of the market."

Concern about Amazon's valuation seems to have come to a head in recent days with reports indicating that the holiday season was a disappointment for retailers both online and off.

ShopperTrak RCT, for instance, estimated on Thursday that holiday retail sales for general merchandise, apparel, furniture and related stores fell 11%, from $127.3 billion last year to $113.1 billion this holiday season. Retail behemoth Wal-Mart ( WMT) was among those that felt the decline, announcing Thursday that its December same-store sales would come in below its expectations. Same-store sales compare results at outlets open for more than one year.

While retail sales as a whole declined, sales at online retailers jumped. Consumers spent $7.92 billion at online retailers between Black Friday, the day after Thanksgiving, and Christmas Day, according to BizRate.com. That is up 23% from last year.

But BizRate had expected online sales to increase 24% on an annual basis. Earlier this week, ComScore Networks reported similar results, saying that online sales had grown by 25% on an annual basis, compared with the 27% growth it expected.

"It appears that ecommerce was strong but not as strong as some investors expected," Rashtchy said. "The expectations may have been raised too much."

Amazon does not release any revenue figures during the quarter, but the company did say on Thursday that its Delight-O-Meter had chalked up 56 million items sold through the site from Nov. 1 through Dec. 23. That was a record amount and up 27% from last year.