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Does Amazon.com, Inc. (AMZN) or Netflix, Inc. (NFLX) Crack First?

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In a high-flying market you can usually find an Icarus or two – companies that rise too far, too fast, and fall hard when the party stops. What we saw with Apple Inc. (NASDAQ:AAPL) last year can happen again.

In the current bull market, two great candidates are Amazon.com, Inc. (NASDAQ:AMZN) and Netflix, Inc. (NASDAQ:NFLX). Both now sell at prices that have nothing to do with earnings. Both offer something many people find of value.

While both are likely to fall in a down market, one is likely to fall harder. Which one?

The Case for Amazon

JPMorgan is among those brokers now making a more bearish case for Amazon.com, Inc. (NASDAQ:AMZN), lowering price targets. Piper Jaffrey has done the same. Of the 41 analysts now following it, 11 are now at neutral, 30 are at buy or overweight.

No one disputes the company’s future, but many see competition eating into its growth rate. Seeking Alpha’s Paolo Santos says Google has it in its sights. It wants more cloud market share, but it’s also aiming at Amazon Prime with its own same-day shipping service, created on behalf of brick-and-mortar merchants.

While Google should be of concern due to its low costs, Amazon.com, Inc. (NASDAQ:AMZN) has been beating them badly for some time. Amazon is continuing to cut cloud prices aggressively, while adding new features and the Amazon API is the industry standard. It’s doing much the same thing with its Kindle Fire tablets, cutting prices aggressively. Unlike Google (and even, to an extent, Apple) Amazon has also turned the Kindle after-market into a money-making machine.The company is also launching a TV campaign, focused on the fashion category, one even many users of Amazon may not know it has.

The only compelling case for Amazon’s fall remains valuation. I sold my own shares at $230 months ago, and it’s up 15% from there to $263. In the end the value of a stock is based on what people are willing to buy it for. I’d be happy to get back in where I got out, but wonder if I’ll get the chance.

The Case for Netflix

Some of the bearish case for Netflix, Inc. (NASDAQ:NFLX) is based on the bullish case for Amazon.com, Inc. (NASDAQ:AMZN). Amazon Prime now has 10 million members, who get some free videos and cheap prices on others, in contrast to Netflix’ all-you-can-eat pricing. It’s now testing a $7.99/month plan that will directly compete with Netflix and competing directly with it in the battle for rights.

Netflix was really treading water until mid-January, when an NPD Group report showed that most people stream to their TVs, not devices.  TVs are Netflix, Inc. (NASDAQ:NFLX)’s strength, as many sets have its software installed in them. This sent the stock off to the races – it’s up 87% since then.

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