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After Hours Action: Amazon, American Express

Thursday, 21 Oct 2010 | 5:25 PM ET

After the bell the traders pored over results from Amazon and American Express. How should you game these names in the wake of earnings.

AFTER HOURS ACTION: AMAZON

Shares of Amazon slipped about 4% in extended trade after the company turned in quarterly results that showed costs were outpacing estimates.

By the numbers, the online retailer said it earned $231 million, or 51 cents a share in the third quarter, versus $199 million, or 45 cents a share in the same period last year.

Sales rose to $$7.56 billion, up from $5.449 billion a year ago.

At the same time, operating expenses rose more than 40 percent to $7.29 billion.

"Revenue increased 39 percent but operating income only grew 7 percent. It's the opposite of what people want to see. People want to see more leverage coming out of the company," says Colin Gillis, of BGC Partners.

Looking ahead, Amazon said it expects sales in its holiday fourth quarter of between $12.0 billion to $13.3 billion—representing growth of 26 percent to 40 percent—on operating profit of $360 million to $560 million—representing a decline of 24 percent to growth of 18 percent.

Analyst: Sell Amazon on Earnings
Working through Amazon's numbers, with BGC Partners analyst Colin Gillis.

"In terms of holiday, the guidance for Q4 is fine on the top line," Colin Gillis says. "This is not a revenue issue right now. This is a possibility issue with Amazon. A leverage, margin issue. On the last call, they talked about how the company needs to be investing to prepare for future growth."

What’s the trade?

These earnings weren’t that bad and I think the pullback is probably a buying opportunity, says Brian Kelly.

I also would buy on the pullback, says Steve Cortes. They have an attractive customer base and for me they’re a player in the cloud space.

I’m a buyer of Amazon at $150, says Joe Terranova. That was once the ceiling and it now becomes the floor.

I expect the stock will overshoot to the downside on Friday but I wouldn’t try and bottom pick either, says Guy Adami. And with Amazon making up about 11% of the RTH, Doug Kass tells me he'd think about shorting the RTH, adds Adami.

Margins are getting pressured, reminds Stephen Weiss. That’s something to watch.

Their growth rate is in a decling trend, says Colin Gillis of BGC. I have a 'sell' rating on the stock with a $95 price target.

> Click here for more coverage of Amazon earnings

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AFTER HOURS ACTION: AMERICAN EXPRESS

Shares of American Express were little changed in the after hours session despite quarterly earnings and sales that exceeded Wall Street expectations.

Chief Executive Kenneth Chenault said in the company's earnings announcement that American Express continued to improve its competitive position "against the backdrop of regulatory and legislative changes that are reshaping the industry."

By the numbers The company said it earned 90 cents a share in the third quarter against 54 cents a share in the same period last year.

Revenue for the quarter was reported at $7.03 billion, versus $6.01 billion last year.

Stock analysts who follow American Express, a Dow component, had expected the company to earn 86 cents a share on sales of $6.79 billion, according to Thomson Reuters

What’s the trade?

The affluent consumer remains resilient and Amex’ customers are affluent. As a result it’s a name that I like, says Brian Kelly.

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I agree with that thesis, says Joe Terranova. I too like Amex.

In terms of valuations, the stock is compelling, says Guy Adami. It’s a great franchise. But the stock hasn’t gone anywhere for the past 6 months.

Also AXP is facing issues with the government and for that reason alone, I’d stay clear, says Steve Cortes.

American Express has lost their link to Continental, adds Stephen Weiss author of The Billion Dollar Mistake, and I think that’s a negative for consumers. Also the DOJ issues are looming. Both issues could keep a lid on the stock.

> Click here for more coverage of American Express earnings


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Trader disclosure: On Oct. 21, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Cortes owns (K); Cortes owns (TSN); Cortes is short crude oil; Cortes is short gold; Cortes is short (RSX); Cortes is short the U.K. Pound; Cortes owns U.S. Treasuries; Cortes owns the S&P 500; Terranova owns (APA), (AAPL), (AXP), (C), (CRM), (GOOG), (GS), (FCX), (MMM), (ORCL), (PCP), (PEP), (PFE), (TBT), (UPL), (VRTS), (XBI); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Weiss owns (AAPL); Weiss owns (QCOM); Weiss owns (PWER); Weiss owns (VZ); Weiss owns (CSX)

For Joe Terranova
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners own more than 1% of (ABAX)
Virtus Investment Partners own more than 1% of (ALK)
Virtus Investment Partners own more than 1% of (AMKR)
Virtus Investment Partners own more than 1% of (CASS)
Virtus Investment Partners own more than 1% of (CSVI)
Virtus Investment Partners own more than 1% of (IGE)
Virtus Investment Partners own more than 1% of (LDR)
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Virtus Investment Partners own more than 1% of (MGRC)
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Virtus Investment Partners own more than 1% of (XLB)
Virtus Investment Partners own more than 1% of (XLP)
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Virtus Investment Partners own more than 1% of (WDFC)
Virtus Investment Partners own more than 1% of (YDNT)
Virtus Investment Partners own more than 1% of (DRYS)

For Brian Kelly
Accounts managed by Kanundrum Capital own (REE)
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (SLV)
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (JJG)
Accounts managed by Kanundrum Capital own (JO)
Accounts managed by Kanundrum Capital own (RS)
Accounts managed by Kanundrum Capital own (UUP)
Accounts managed by Kanundrum Capital own Swiss Francs
Accounts managed by Kanundrum Capital are short the U.K. Pound

For Dan Niles
Niles and Alpha One own (AAPL), (QCOM), (DELL), (PWER)

For Anthony Scaramucci
***No Disclosures***

For Brian Stutland
***No Disclosures***

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