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Amazon may have had disturbing |
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Released on Thursday, October 28, 2011, 10:30 AM ET
Pittsburgh, PA (SpeculatingStocks) - Amazon.com, so it’s on about every news station right about now, and its down, way down. But unlike the news analyst, we aren’t so down on this stock. Call us contrarians, but correct us if we are wrong, the best time to buy is when the stock is undervalued.
Now Amazon (NASDAQ:AMZN) did report rather disturbing earnings yesterday, only $0.14 per share, way down from analyst estimates. This caused a combined extra-day and current trading drop-off of 11%, and the stock’s price is currently trading at $203.89 per share (10:30 AM EDT, October 27, 2011). But what has us thinking differently is the company’s long term outlook.
Amazon reportedly showed such low earnings per share because of increased spending in the Q3, spending they believe will cause growth in the future. With Amazon’s Fire promising to capture a portion of the market, this might not be the wrong idea and expanding Amazon’s total market share is something the company has been known to do—even at the cost of increased expenses and lower overall earnings, after all is an investment truly an expense if you expect to get the principal plus some back in the future? No. Otherwise you wouldn’t be investing, would you.
It is probably not likely that Amazon will recuperate the decrease in earnings per share in the forth quarter of this year, as they would need to do nearly 3 times their average EPS per quarter to reach it, but over the long run, Amazons earnings should increase. With a massive price to earnings multiple of around 100, any small movement and increase in the EPS will reflect a large movement in the stock’s price.
It is possible that the sock is currently undervalued, due to recent reactions of the lower than expected EPS results, so it might be selling at a discount of true-long-term value. However, it could also be that Amazon simply took a hit on the Fire and won’t be able to recover such losses. In either case, keep a look out for this giant, it’s still an interesting play.
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