Talking Numbers

Amazon vs. Disney: The battle for profits

Amazon vs. Disney: The battle for profits
Amazon vs. Disney: The battle for profits

Never mind Orlando Bloom versus Justin Bieber—there's another messy feud brewing in entertainment.

Amazon is taking a swing at Disney, blocking preorders of the Mouse House's hit, "Captain America: The Winter Soldier." Disney isn't the only media company that Amazon has battled recently; Time Warner and Hachette Book Group have also been at loggerheads with the online retail giant.

According to Gina Sanchez, founder of Chantico Global, Amazon's quarrels have a lot to do with the company trying to boost its scant profit margins in order to stave off investor skepticism.

Amazon is "trying to press [content] prices lower so they can increase their margins," said Sanchez, a CNBC contributor. "They need to do this."

Based on data from FactSet, Amazon has squeezed out just a 5.7 percent margin (based on earnings before taxes, depreciation and amortization) from its $81.76 billion in revenue over the last 12 months. Still, it is worth noting that over the same period, the company's capital expenditures totaled $4.3 billion, which is nearly equal to its EBITDA.

Richard Ross, global technical strategist at Auerbach Grayson, observes that Amazon's stock has been taking a hit in 2014 despite the company's many newsworthy developments.

"Phones and drones and fights—they make great headlines, but they don't make for great stock performance," said Ross, a "Talking Numbers" contributor, referring to the online retail giant's new Amazon Fire phone and its discussions about drone delivery . "With Amazon down 20 percent on a year-to-date basis even as the bull market soldiers on, there's some serious explaining to do."

Still, Ross suggests a relatively simple technical trading strategy for anyone choosing to trade Amazon's stock. All that is required is the 100-week moving average.

"Since breaking above [that moving average] back in 2009, the stock is up over 900 percent," Ross said. "You haven't gotten one sell signal, meaning one close below that 100-week moving average. So let's stick with what's been working here in the stock."

Amazon's stock has tested the 100-week moving average, currently at $304 per share, twice in the past year. Both times, it has remained above it.

"On a break below $300, you cannot own the stock," Rosssaid. "But if you like the story, [if] you like the future of drones and all this other stuff, then you can buy the stock and use that 100-week as your protective stop."

Still, that doesn't mean Ross would get involved in Amazon. "I don't like stocks with 1,500 P/Es [price-to-earnings multiples] that are up 1,000 percent over the past five years, but I'm giving you a little strategy if that's your cup of tea."

To see the full discussion on Amazon, with Sanchez on the fundamentals and Ross on the technicals, watch the above video.

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