The vast majority of Wall Street analysts, including us, have dismissed Amazon's business model as unsustainable because the company isn't profitable. That could change in 2014. If it does, Amazon is poised to go on a fast and furious rise from $400 to $1,000, as the bears throw in the towel and respect Amazon's disruptive dominance.
It's important to note that everything we've said about Amazon is also true about Alibaba in China. If Amazon can go to $1,000, it means Yahoo! (YHOO) can go to $100.
Our epiphany on Amazon is coming late. Nevertheless, it could be argued that the stock run over the past five years has been "tough money" in the absence of profitability. The massive investment Amazon has made in infrastructure could be on the verge of wiping out traditional retail. We'll get more clarity on Jan. 30.
In terms of stock action, Amazon hasn't gotten a pre-earnings run. It closed at $395 on Dec. 18 and has hovered near that level over the past month of trading. This earnings report is worthy of a "flyer" position, similar to how we'll handle Apple. If Amazon delivers, the portfolio will have AAA status.
Apple is the innovator. Amazon is the disruptor. And Alibaba will be the IPO of 2014.
Here is a roundup of articles on Amazon's disruptive power.
- "Why Did IBM Dump Its Commodity Server Biz? Amazon, That's Why"
- "Amazon 'Underestimated' in Apparel As Share Grows"
- "Amazon Upgraded by Morgan Stanley to $435"
- "Amazon Upgraded by Citi to $457"
- "Topeka Upgrades Amazon to $485"
- "Amazon Has Over 20 Million Prime Members"
- "Amazon Vending Machines Show How Amazon Could Take Over the World"
- "Amazon's Profits: What People Don't Understand"
- "Amazon's Profits in Perspective"
At the time of publication, the author was long on AAPL but held no positions in any of the other stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.