AMazon roku e-commerce ecommerce

Will Amazon Represent Half Of E-Commerce, Roku Short Sellers Swarm

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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Will Amazon Represent Half Of E-Commerce, Roku Short Sellers Swarm

The stock market continues to rally, with the S&P 500 up another 1.2 percent, and it seems like the inflation fears are now in the rearview mirror. Will those fears surface again sometime in 2018? I seriously doubt we have heard the last about rate hikes and inflation concerns, in fact I feel quite certain concerns will rise again.

There is an outside shot the S&P 500 can get to the Box I have drawn by March 1. To think, it was just a few short weeks ago, that it seemed nearly impossible.

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S&P 500

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Roku shorts sellers are swarming, the borrow rate jumped to a negative 48.5 percent, today, up from nearly negative 30 percent on Friday. That is a big jump and means short sellers are scrambling to get there hands on shares of Roku to go short.

(Interactive Brokers)

Roku’s chart looks pretty bad, and the stock is fighting for its life, at its support level at $40. A break of support at that levels sends the stock sharply lower.


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Amazon shares broke out in a big way today, finally crossing over $1,500. So I guess I was wrong about Amazon and the $1500 mark, leading to a pullback.


Does it change my opinion that shares are overvalued, no. I still think Amazon is overvalued, and every time historically Amazon has traded at its current one-year forward price to sales ratio, the stock has pulled back.  It seems pretty clear from looking at that chart, but hey what do I know. I’m just one of many.

AMZN Chart

AMZN data by YCharts

According to this chart Amazon already accounts for nearly 40 percent of total e-commerce sales in the US. It likely means that Amazon is going to need to become an even more significant percentage of this total in time to keep growing at its current rate.

Fundamental Chart Chart

Fundamental Chart data by YCharts

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E-Commerce Vs. Amazon

US e-commerce growth has trended higher in recent years and has grown by about 16.5 percent over the past year. But Amazon is growing faster and is expected to continue to grow much quicker, which means Amazon will become a more significant part of total e-commerce sales.

In the chart below I included analysts estimates to calculate the trailing-twelve-month revenue for Amazon, and you can see how much Amazon sales are expected to grow in the coming years.

In fact, using a regression model, one can see at the current pace, Amazon would account for nearly 53 percent of all e-commerce sales by the year 2020. Sounds crazy, but then again, it makes up 40 percent of total e-commerce sales now, and that is pretty crazy too.

It all comes down to whether you believe Amazon can continue at its current rate?

If the answer is yes, you believe, then Amazon is likely cheap at these levels, because the pace of growth will be able to keep up the valuation. If the answer is no, then Amazon is no bargain now, and estimate increases will not be enough to sustain the valuation.

But then again e-commerce is only 9 percent of the total retail sales in the US.

US E-Commerce Sales as Percent of Retail Sales Chart

US E-Commerce Sales as Percent of Retail Sales data by YCharts

Something to think about for sure.

Good Luck!

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Tags: #sp500 #amazon #roku