Amazon.com‘s (NASDAQ:AMZN) march back to record highs began in late March 2015 and has been a fairly steady climb since that time. Shares of the e-commerce giant proceeded to hit a new all-time high of $844.36 on Oct. 5 and have gained nearly 22 percent since January 1st. The stock is currently up nearly 430 points y/y, or 106%, at $823 as of Friday’s close, adding more than $230 billion to the company’s market cap.
However, a recent short interest report from financial analytics firm S3 Partners shows a sharp increase in short interest for shares of the online retailer. As of last week, AMZN’s short dollars jumped to $5.3 billion, marking the first time that figure has ever eclipsed $5 billion, according to the report.
It should be noted though that this was not unexpected. Short interest data for the Sept. 15 – Sept. 30 settlement period also indicated a significant increase in short interest for shares of Amazon. As of Sept. 30, bets placed in favor of Amazon stock heading south jumped by nearly 30%, totaling more than 5.8 million shares.
If short interest is on the rise, then this could be an indication the Street expects a deterioration in the stock’s price-per-share.
“They’re seeing an overheated stock,” Ihor Dusaniwsky, head of research at New York-based S3 told CNBC, noting that “There’s serious conviction that Amazon is going to pause and reverse course temporarily coming into the end of the year.”
While technically speaking Dusaniwsky may have a point given Amazon shares look a bit toppy here, especially if they print above $850, which is a level that should cause a short-term trend change from bullish to sideways, investors who buy AMZN short may get burned if they bet long-term not only against Jeff Bezos, but also his fast-growing company, a company worth noting with enduring growth prospects.
Despite’s Amazon’s soaring stock price, the fact is its surge has been driven by a trailing 12-month revenue growth of 26% ; strong performance in the company’s fast-growing A.W.S. cloud division, which is now on track to bring in more than $10 billion a year in revenue ; new services launched including Amazon Music Unlimited, a standalone music streaming service to compete with established streaming services like Apple Music (NASDAQ:AAPL) and Spotify, as well as plans to hire 120,000 temporary workers, a 20% increase from last year.
Additionally, the e-commerce giant has unprecedented scale, and is highly differentiated from other mega retailers, such as Wal-Mart Stores, Inc. (NYSE:WMT) and Costco Wholesale Corporation (NASDAQ:COST). Let’s not forget here also the earnings performance aspect. Amazon has beaten estimates in six out of the last seven quarters with an average positive earnings surprise of 2.88 percent.
This is a particularly timely topic because Amazon reports third-quarter results after market close on Thursday, October 27. The Street is looking for EPS of $0.80 and revenue of $32.69 billion.
Last quarter, the $387 billion market cap Seattle-based company posted a significant positive earnings surprise of 60.36%, reporting EPS of $1.78, $0.67 better than the Street’s consensus estimate of $1.11. Revenue increased 31.15% year-over-year to $30.4 billion versus the $23.18 billion reported. Meanwhile, EarningsWhisper.com reports a whisper number of $0.93 per share.
Investors and momentum traders can look for more color on the company’s business when the results go live.