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Is Amazon’s Stock Cracking?

Amazon will take a bite out of Apple in the holiday tablet war, but that doesn’t mean Amazon’s going to be making any money, BGC Partner’s Colin Gillis told the “Fast Money” team Wednesday. In fact, he said Amazon’s stock is a 'sell.'

“This is an expensive stock that looks like its cracking,” Gillis said.

However, the Kindle Fire will “absolutely hurt iPad sales,” he said, citing studies that show Amazon’s tablet taking about 25 percent of sales away from the iPad.

Amazon will probably sell about five million Kindle Fires this quarter, Gillis noted. But the Internet retailer is selling it at an “attractive” price point that isn’t going to make the company any money.

“This is not going to be a good thing for Amazon’s bottom line in the near-term,” he added.

So why sell the new tablet with no profit margin? Gillis said Amazon is weak in digital music and digital moves, and the Kindle Fire will help it catch up. But that's not enough for him.

“The reality is do you want to pay an ultra premium price in valuation for a company that (he thinks) is behind the curve in those two critical areas?” he asked.

Apple , on the other hand, may lose some iPad sales to the Kindle Fire, but Gillis thinks the company’s valuation is reasonable. He has a ‘hold’ rating on the stock.


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Trader disclosure: On Nov. 23, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Karabell is long APL; Karabell is long MS; Karabell is long IBM; Karabell is long GOOG; Karabell is long ORCL; Karabell is long CAT; Karabell is long JOYG

For Zach Karabell
Rivertwice is short XLF
Rivertwice is short SMH
Rivertwice is long IBM
Rivertwice has long calls HPQ
Rivertwice is long QCOM
Rivertwice is long ORCL
Rivertwice is long DE

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No disclosures

For James Lebenthal
Lebenthal is long C
Lebenthal is long XLF
Lebenthal is long MPC
Lebenthal is long CAT

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For Colin Gillis
BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report (AMZN).
BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report (AAPL).

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No disclosures

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