'Fast Money': Amazon.com misses big
David Tong | [email protected]
The Dow Jones Industrial Average plummeted 207, or 2.74 percent, to 11706.62. The S&P 500 dropped 25.14, or 2.1 percent, to 1229.05. The Nasdaq lost 61.02, or 2.26 percent, to 2638.42.
Simon Hobbs, the moderator of CNBC's "Fast Money," began the show with Amazon.com (AMZN), whose shares were falling after missing estimates on the top and bottom lines.
Joe Terranova said the disappointing report will lead to lower price targets and a downgrade of the stock tomorrow. He said investors will be watching closely to see if the stock falls below its technically important Oct. 4 price point of $200.43, adding that investors are demanding better margins and profits from a mature, richly valued company.
Colin Gillis of BGC Partners said Amazon is an unbelievably expensive stock. He said the company is seeing a slowdown in revenue growth and could possibly lose money in the December quarter.
Gillis said Amazon is facing higher shipping costs and doesn't provide visibility into what it is doing with the Kindle Fire in this economic environment. He said he doesn't expect to see a lift in its margins anytime soon.
Karen Finerman hammered away at the stock's high valuation. Drawing a comparison to Wal-Mart's (WMT) earnings growth between 2001 and 2011, she said Amazon would have to sustain a compound annual growth rate of 23 percent in the next 10 years to justify its price.
CNBC reporter Jon Fortt, who was listening in on Amazon's conference call, said that the company touted its growth rates were the highest since 2000 and that it was seeking to broaden the range of the Kindle to include ads and media. He said the company acknowledged a slowdown in electronics sales growth.
Ron Insana said investors need to be selective in the tech space. He said Apple (AAPL) is OK and liked Microsoft (MSFT), Intel (INTC), and even Cisco (CSCO).
Finerman said everything hinges on Europe. She was skeptical whether a universal solution to end the debt crisis will materialize tomorrow.
Terranova said the S&P will need to hold above 1195 if it is to continue higher, while Dan Nathan said tomorrow's Eurozone summit is setting up for a disappointment. Guy Adami also was bearish on the outcome, saying any solution will lead to a rise in rates.
Sony Kapoor, managing director for the Re-Define think tank, also said any agreement will come up short of what is needed to resolve the crisis.
Brian Kelly said it will be a deflationary event no matter what happens. As a result, the U.S. and U.K. governments will fan inflation when they begin printing money. He said the best trade in this inflationary environment will be gold, an asset in undersupply.
Isana said Europe's problems won't be resolved until the European Central Bank moves to a zero-interest-rate policy and quantitative easing. He expects investors to return to the U.S. markets because they look good by comparison.
Netflix (NFLX) took another drubbing, falling 35 percent. Mike Vorhaus of Magid Advisers said the turning point for the company came when it decided to change its pricing structure for DVDs and streaming, which caused a subscriber blacklash that continues today. He said Netflix is in a tough position where Hollywood is demanding more money for content.
Hobbs brought in Jeff Hirsch, author of the "Stock Trader's Almanac," to comment on the recent run in small-cap and tech names. Hirsch said the market has been following a seasonal pattern and should set up for a bullish run from November to January.
Looking ahead to Ford's (F) earnings tomorrow, Efraim Levy of Standard and Poor's, said he expects the auto company to put up solid numbers. He said Ford is solidly positioned with a healthy balance sheet and an attractive valuation.
Levy said Ford's auto has enjoyed strong U.S. sales but is looking to China and the rest of Asia for further growth. He has a 12-month price target of $17 for the stock and said the entire auto sector has rebounded, making stocks like Ford, General Motors (GM), and Johnson Controls (JCI) attractive.
In the "Final Trades," Adami liked General Mills (GIS). Finerman said she was selling a little of Macy's (M). And Terranova liked Juniper Networks (JNPR).
(optionMONSTER and TheStreet.com exchange a select number of posts each day as part of a limited content-sharing agreement.)