Watch Out: Barbarians At The Gate For (AMZN)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified ( AMZN) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified as such a stock due to the following factors:

  • AMZN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $1.1 billion.
  • AMZN has traded 3.7 million shares today.
  • AMZN traded in a range 209.2% of the normal price range with a price range of $13.09.
  • AMZN traded above its daily resistance level (quality: 55 days, meaning that the stock is crossing a resistance level set by the last 55 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on AMZN:, Inc. operates as an online retailer in North America and internationally. The company operates in two segments, North America and International. Currently there are 18 analysts that rate a buy, no analysts rate it a sell, and 12 rate it a hold.

The average volume for has been 3.6 million shares per day over the past 30 days. has a market cap of $144.2 billion and is part of the services sector and retail industry. The stock has a beta of 1.69 and a short float of 2.1% with 2.25 days to cover. Shares are down 20.6% year-to-date as of the close of trading on Thursday.

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TheStreet Quant Ratings rates as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself, poor profit margins and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 965.9% when compared to the same quarter one year ago, falling from -$41.00 million to -$437.00 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet & Catalog Retail industry and the overall market, AMAZON.COM INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of AMAZON.COM INC has not done very well: it is down 16.72% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The gross profit margin for AMAZON.COM INC is currently lower than what is desirable, coming in at 34.98%. Regardless of AMZN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.12% trails the industry average.
  • AMAZON.COM INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AMAZON.COM INC turned its bottom line around by earning $0.58 versus -$0.10 in the prior year. For the next year, the market is expecting a contraction of 224.1% in earnings (-$0.72 versus $0.58).


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