Tuesday, March 23, 2010

Impact of Apple's iPad on Amazon Revenue: Shorting QQQQ Not AMZN

There is noise on financial blogs about shorting Amazon (AMZN) here in light if the imminent loss of sales due to Apple's iPad (AAPL).

Using data from Barclays, Rory Maher estimates that if Amazon were to lose its e-book market share from the current 60% to 25%, its effect on revenue would be a drop of 2.0%:

Amazon had total revenues of $24.5B in 2009, with an estimated $250M derived from the Kindle. Now Mr. Maher estimates revenue due to Kindle and ebooks at $1.5B for 2010 and makes his calculations based on that higher figure. That is a big jump from 2009. If the actual sales of Kindle/ebooks is much lower, then the effect on Amazon will be much smaller too.

Amazon's RSI7 are at 54.51/61.35/73.27. Only the monthly is slightly overbought, and it still compares favorably to QQQQ whose numbers are at 77.24/76.24/74.7, overbought on all counts.
The optimum RSI to sell Amazon is Rsi9 (computed by our own Risk Analysis tool) , and a sell alert was issued on Dec 1 when it was trading a $142.5:

Today AMZN trades at $128.82:

Relatively speaking, the odds favor shorting QQQQ at this point.

Disclaimer: The author does not hold AMZN, but just bought puts on QQQQ.

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