Grosfield called the Fire Phone a ploy to provide customers with a new way to spend money with Amazon. He said the company should've developed an app instead, and he's not surprised it failed. Still, Grosfield said Amazon's troubles highlight both its weaknesses and its strengths.

"You can't spend money unwisely," Grosfield said. "Jeff [Bezos] doesn't have a history of making bad decisions, he's a smart guy and has done wonders for Amazon, but are they trying too hard to break into new markets? It's possible. But how many companies can afford to do this and survive? That says something about the level of their success and their finances."

Despite losses of over $1 billion in six months, Moorhead doesn't see Amazon changing its spending habits anytime soon. It has the luxury of deep pockets, and Bezos is firmly in control.

Web services and hardware is something Amazon is investing in for the future, he said. "They are also investing in their same-day service that won't pay off until five years down the road as well. They are trying to lock that in, so it pays off later. Wall Street tends to be ok with those kinds of things to an extent. Bezos is a huge personal owner of Amazon. I think Amazon will keep showing this business model until that changes or until they turn a profit."