White House Whiplash on Amazon Adds to Sky-High Tech Volatility

Gene Munster of Loup Ventures discusses the impact of a Trump tweet on Amazon and outlook for the company overall.

First Donald Trump was “obsessed” with regulating Then the U.S. president had “no plans” to change policy toward the e-commerce behemoth. Finally there was the tweet.

The back-and-forth whipsawed Amazon shares and sent the stock’s equivalent of the Cboe Volatility Index surging to a multiyear high. Its two-week increase is the second-most on record going back to the start of 2011.

Even as Amazon takes its turn as the market’s tech whipping boy, investors have been more worried about the downside for this stock relative to its other megacap tech brethren many other times -- including in 2018.

It’s a testament to just how far the high flying group has fallen in the past two weeks as everything from Facebook’s latest privacy gaffe to driverless car accidents and trade angst buffeted the sector.

The gap between the implied volatility (a rough proxy for price) on 25-delta Amazon puts versus the PowerShares QQQ Trust Series 1 is, in essence, a gauge of fear premium for the e-commerce giant compared to the tech heavy index. It has indeed blown out -- but not to its highest level of 2018.

Moreover, the three-month average for this spread remains well below its five-year mean after having spent most of 2017 at extremely subdued levels. That’s a lingering hallmark of a bygone market regime in which Amazon, as well as other components of the FANG quartet, managed to post standout growth with fairly low volatility.

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