Fall Back Friday

Very bouncy but still not getting over the hump.

As we noted yesterday, 3,280 on /ES is the line to watch and we keep failing it – not a good sign into the weekend.  Unfortunately, the Dow dropped 140 points back from yesterday's rocket close and despite Amazon's 12% pop this morning (not a Dow component but boosting all indexes), which is keeping the Nasdaq green, at least.

People staying home with the flu is good for AMZN.  We're now over the 10,000 infection mark (213 deaths) but it does seem to be slowing for the moment, so that's a little encouraging.  We'll have a far better idea of the situation after the weekend but the US issued a Level 4 Travel Advisory for China, which is essentially saying DO NOT GO TO CHINA – so things are certainly not under control either.  

Image result for amazon sales over time 2019"AMZN's stock price is still out of control at $2,085 this morning as their "terrific" earnings were actually just $6.47/share so $23.01 total for 2019 means they are still trading at close to 100x their actual earnings and, on the whole it's barely up from 2018's $19.80/share. 

You might pay 100x earnings for companies that are going to grow their earnings 5 times in the near future but, to do that, AMZN would have to make $50Bn vs the current $10Bn and they currently have $280Bn in sales so Amazon would need to get close to $1Tn in sales before hitting $50Bn – 15% of all US Retail Sales!?!

Amazon Web Services is responsible for $10Bn in revenues and $2.6Bn out of $3.88Bn in profits – the Retail Operation is practically a loss-leader.  I really don't see how that's going be an engine for growth to justify the company's Trillion-Dollar price tag.

Have a great weekend, 

- Phil