It's Just Math

$AMZN

I preface this post by saying it is best for your sanity to just closet index and occasionally own or short a stock based on a view. Phew. Ok, I am pretty sure, tonight after hours, is the most confused and confounded I have been in a long time. Amazon had a “strong” quarter in retail with breakeven overall (US and international) versus expectations (I agree) by selling $100 billion of crap and finally breaking even. Yipee! Fair enough. Retail is being optimized to make money and the cost cuts helped this qtr to B/E. Heroic? No but better than expectations. The stock rallied $4 into the print expecting, we presume, upside to AWS since Microsoft had such a solid qtr adding more than $800 million in new business. Amazon grew 16% in 1Q year over year, inline with their guidance and projections by sellside analysts. Hello, AWS was flat sequentially, did not grow and that had the stock up $10 after hours on relief? The stock sold off when the CFO said the 16% was followed by 11% in April, another deceleration. My goodness, mathematically, if they described this as “growth”, they could have said “we expect to add revenues sequentially in June!” Look below, you see that 11% was best case scenario unless there was a sudden surge in existing and new business. To keep 15% growth they would have needed to add $1 billion in growth sequentially! It’s just MATH.