On Tuesday the Fast Money pros were trying to determine the best way to play Amazon with shares breaking below $200 in extended trade after the company missed expectations.
Also Amazon’s guidance for the fourth quarter fell short of Wall Street's expectations.
Joe Terranova suggests the best trade is to wait and watch – at least for the next 24 hours.
”I’d want to see if the stock closes below $200.43 on Wednesday,” he explains. That’s the low from October 4th and lately the stock has been making a series of higher lows.”
In other words, Terranova wants to see if the trend is broken before generating a trading thesis.
But keep in mind "this is a mature company with a rich valuation and the Street is demanding to see better margins. In order to command that kind of premium, Amazon has to deliver."
If you’re a technical trader, Guy Adami says ”I’d shoot against $190.” It’s a key Fibonacci level. "But their quarter was a disaster and their guidance wasn't good either."
Even if the stock sells off, trader Dan Nathan wouldn’t freak out.
Amazon always reports low single digit operating margins every quarter, he reminds “I’m surprised the Street is this surprised. Although Nathan thinks the stock sells off, he expects it to find support around $200. "It's not a Netflix situation,” he says.
"But there's a possibility the the company could lose money in the December quarter. That's a real shock," says top BGC analyst Colin Gillis.
He has a sell rating on the company.
By the numbers earnings, excluding items, fell to 14 cents per share, down from 51 cents per share in the year-earlier period.
Net income dropped 73 percent to $63 million from $231 million, a year ago.
Revenue in the third quarter increased 44 percent to $10.88 billion, up from $7.56 billion in the 2010 quarter but still short of expectations.
Analysts had expected Amazon to deliver earnings per share of 24 cents on revenue of $10.95 billion, according to Thomson Reuters.
In the fourth quarter, the company said it expects net sales to be between $16.45 billion and $18.65 billion, an increase of between 27 percent and 44 percent compared to fourth quarter 2010. Analysts had expected revenue of between $16.88 billion and $19.2 billion for the fourth quarter.
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Trader disclosure: On October 25, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Nathan is long Oct. put spread AMZN; Nathan is long Jan. put spread BAC; Nathan is long Nov. put spread MS; Nathan is long Oct. put butterfly NFLX; Nathan is long Oct. put spread GS; Nathan is long Mar. call spread RIMM; Adami Owns AGU; Adami Owns C; Adami Owns GS; Adami Owns INTC; Adami Owns MSFT; Adami Owns NUE; Adami Owns BTU; Finerman owns AAPL; Finerman owns GOOG; Finerman owns JPM stock leaps; Finerman owns MSFT; Finerman’s firm owns AAPL; Finerman’s firm owns JPM stock leaps; Finerman’s firm owns MSFT; Finerman’s firm owns short calls IBM; Terranova owns IBM; Terranova owns AAPL; Terranova owns AXP; Terranova owns CAT; Terranova owns F; Terranova owns GS; Terranova owns OXY; Terranova owns FCX; Terranova owns LQD; Terranova owns MUB
For Brian Kelly
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This report is for informational purposes only and is based on publicly available data believed to be reliable, but no representation is made that such data are accurate or complete. Opinions and projections contained herein reflect our opinion as of the date of this report and are subject to change. Pursuant to BGC Financial LP’s policy, the author of this report does not own shares in any company he/she covers.
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