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Oct 13, 2016

S3 BLACKLIGHT: Amazon’s Stock Price & Short Interest Hit Historical Highs

The Amazon.com Inc. (AMZN US) juggernaut keeps rolling with the online retailer ready to hire 120,000 seasonal workers, up 20% from 2015, while other major brick and mortar retailers hiring plans remain constant year over year. Amazon’s stock price hit a historical high of $844.36 on October 5th and is up 22% for the year, handily outperforming both the S&P (+6.1%) and Nasdaq (+8.7%) indexes. Continued growth in its existing services such as Cloud Services, Video and Prime is being augmented with new growth services such as restaurants, grocery stores and streaming via Music Unlimited.

Amazon’s 2016 full year revenues are projected to increase 28% from 2015 and earnings per share to increase 373%. While expanding its retailing footprint Amazon is diversifying and increasing its revenue stream, but it is also acquiring established and competent competitors. Wal-Mart Stores (WMT US) is looking to grow its online presence out of its brick and mortar foundation; Netflix Inc. (NFLX US) continues to increase its original programing to grow its subscription base; Kroger Co. (KR US) and Whole Foods Market (WFM US) are seeing some of their market share move online; and Apple Inc. (AAPL US) and Pandora Media (P US) are seeing a new seasoned competitor entering the music streaming sector.  

While Amazon’s stock price grew at an above market rate, its short interest grew at an even faster pace in 2016. Amazon’s short interest hit a historical high of $5.3 billion this week, up $2.5 billion or 89% this year

Most of the increase in short interest occurred since September with $1.8 billion of new short selling executed in the last six weeks. This short selling was not valuation based, but momentum based. Traders are betting on AMZN’s stock price to cool off temporarily after hitting its historical high. But with many analysts increasing their target price to $1,000 we can expect a tidal wave of buy to covers when AMZN’s stock price spikes again.

For more information on the above analysis, please contact:
Ihor Dusaniwsky, Head of Research, S3 Partners, LLC     Ihor.Dusaniwsky@S3Partners.net

The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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