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In isolation, yesterday wasn't great for our stocks. But a few disappointments here and there are an intrinsic part of the investment cycle.  The only challenge is deciding when to run and when to hold on for better days ahead.

 

We're holding onto Amazon (AMZN: $1,766, flat early this week but down 7% overnight) despite what some are calling a miss. In our view, success here depends on where you want Jeff Bezos to be in his long-term expansion plan. If you're on his side, revenue is the most important thing right now, so the fact that sales were up 24% from last year is worth any amount of pressure on the bottom line. Profit growth will come later.

 

But that perspective requires a more strategic view of the company's pivots between sales growth and profitability. Otherwise, all you'll see is that Amazon spent more than expected on one-day Prime shipping, Cloud infrastructure and other expense centers in the quarter, intensifying what was always going to be at least a 20% year-over-year earnings decline.

 

Yes, Amazon booked $4.23 per share in profit, or $2.13 billion, not bad, but we were expecting $4.58, but the shortfall barely matters when you're dealing with a company valued at 68X earnings. Or at least, that was the multiple yesterday. Surrendering that extra $0.35 and guiding our 4Q19 target down a bit (which they did) doesn't exactly negate that aggressive growth story. It only slows the math a few months. When Bezos is ready to reach for profit again, he'll do it.

 

In the meantime, the people spooked by that bumpy profit curve probably weren't going to be happy anyway. Hearing that sales in the current holiday quarter may come in at least $1 billion below our previous projection isn't great either, but a lot of that slowdown is from overseas markets where shifting seasonal spending patterns threw off the quarterly numbers. That money hasn't actually gone away. It will come back, and when it does, Amazon will be expanding its top line 20% a year once again. This will pass.

 

The firm said they would book $80-$86 billion in the 4th quarter; the Street was looking for $87.2 billion, so investors knocked the stock down by $120 overnight.  What a joke. We're making a note about this guidance, and you can too if you want to play along with this silly Wall Street game.  We're predicting right here and now that Amazon will book at the high end of their range and just might hit $90 billion in revenues.  Check back with us around the 3rd week of January.

 

Likewise, while Twitter (TWTR: $31, down 21%) was punished for only giving us $0.05 per share in profit when we wanted $0.20, anyone who really knows this company already realized the quarter was going to be a rough year-over-year comparison. There wasn't going to be any earnings growth here. Management let us know that weeks ago when they warned that a shifting ad mix was going to be a drag on the numbers.

 

Today we learned a glitch in the company's advertising software for mobile devices bit more deeply into the bottom line than we anticipated. That problem has since been solved, so lost revenue will be made up from here as long as chatter on the platform remains robust. And that's where Twitter actually outperformed. We were looking for 140 million people logging in every day. The company gave us 145 million. As long as that many people are typing away, the long-term fundamental trends still point up.

 

All in all, our universe so far looks more like Visa (V: $176, flat this week), which did everything right. With $3.3 billion profit on $6.1 billion in revenue, growth is accelerating. Last quarter we were happy to see 11% improvement on both the top and the bottom line. This time around, a 13% boost on the top turned into 18% on the bottom. Who said global juggernauts can't achieve efficiencies of scale?

 

Among all BMR companies that have reported so far, only Twitter really stung. We were expecting a tough comparison on Amazon and everything else is doing better than we anticipated. If this goes on, our recommendations will deliver 10% earnings growth this quarter . . . like night and day compared to the 4% decline the market as a whole will probably dish out. And it's still early. Let's see what Ventas (VTR) gives us this morning.