Here’s Why Amazon.com ($AMZN) Will Be a Profitable Short

August 07, 2023

The following analysis and commentary is from the most recent Short Seller’s Journal. In the context of the stock market going “full idiot” right now, AMZN’s share price has levitated to an absurd valuation. You can learn more about this newsletter here: Short Seller’s Journal Information.

Amazon (AMZN) reported its Q2 numbers on Thursday after the close and smashed the consensus estimates across the board. The operating profit margin was 5.7%, up from 2.7% YoY and 3.7% in Q1 2023. The stock jumped $11 on Friday, closing at $139.57 although it traded as high as $143.63. The source of the jubilation was an unexpectedly large increase in product sales (e-commerce, Whole Foods, etc) and a $3.2 billion operating profit generated by the products division. Interestingly, the Street and media ignored the glaring slowdown in AWS’ sales growth as well as the 6% YoY decline in operating profits for the cloud services business. Here’s what that slowdown in revenue growth looks like graphically (chart source: Bill Maurer, Seeking Alpha):