"Here's a novel way to drive up a company’s share price," writes the NYT's Jeff Sommer. "Pay billions of dollars in additional taxes." Forensic accountant Robert Olstein reckons that companies such as Apple (AAPL), Microsoft (MSFT) and Cisco (CSCO) should repatriate the tens of billions dollars they hold abroad, pay tax on it, and then use the rest of the cash to repurchase stock. That would boost their share prices by at least 20%. [View news story]
Why pay tax on it, when you can get a nearly free loan against that foreign cash right here in the USA to either buy back shares, offer increased dividend or invest in the business. When the tax holiday comes (and it will come next administration whether its Clinton or a Republican) you can repatriate and pay off the loan.
A low repatriation tax may just be the best stimulus the US can have right now, but the current admin's ideology won't allow it.
Apple Has The Cash To Drive Its Shares Back To $700 [View article]
The run up last year was not irrational .. they were trading at 13x forward earnings .. AMZN and CRM are irrational. Apple is worth $700. Having the stock trade where it is (P/E less than 9), is not only unnecessary it is unhealthy - it creates additional dilution in stock compensation, lowers acquisition flexibility, and most importantly can lead to employees leaving due to lower compensation than what comp is offering.
If you believe your stock is cheap and you have too much cash - why wouldn't you buy it back? .. no one knows better than the company what their stock is worth (they know the roadmap). By not buying back, they are telling the world they are not worth more than $420.
Is The U.S. Building An Unsustainable Welfare Support System? [View article]
Varan, you haven't talked to enough people then. I know plenty of people here in RI who chose welfare and gvt support programs over work. They typically also have a part time job under the table job as well to make matters worse. Many others also are on extended unemployment and will not look for documented work until the gvt finally ends the program (it is very easy to meet the "looking for work requirement").
The real sad fact is that this gives the programs a bad name and hurts the true needy and disabled. Everyone here knows it, and they look the other way. A sad way of life in the liberal NorthEast. The shrinking few supporting the many. It is unsustainable.
I really like the aggregation and cap idea - that is fair and provides incentive.
Investors Are Missing Apple's China Opportunity [View article]
musiccomposer - I can't believe that right now AMZN Enterprise value is 51% of Apple's. Think about that fact for a minute ... - Apple revenue is 3x bigger, - growth is higher (and has higher margin per $), - AAPL book value is 15.5x AMZN, - AAPL 2.6% dividend vs. AMZN 0%, - AAPL current ratio of 1.5 vs. AMZN 1.1, - $41.7B in earnings in CY12 for Apple vs. a loss for Amazon. - Apple Earnings are expected to be 61,000 times larger than AMZN in 2013.
Hi Paulo - I completely agree with everything you say here, except the magnitude of the drop. Fair value is about $180 on both a DCF and sum of parts. For sum of parts example, AMZN has 3 business:
(1) 1P e-com ($51.7B TTM revs) - value at WMT 0.50x = $25.9B (2) 3P e-com ($6.8B TTM revs) - value at eBay 5.12x = $35.0B (3) AWS & dig ($2.5B TTM revs) - value at RAX 8.27x = $20.8B Total = 1.34x, or $81.7B (/461 shares) = $177.30
That is 35% less than today and I beleive will happen this year.
Something Is Definitely Broken With The Market [View article]
You're last statement summed it up. Amazon is a great company, no doubt, but the stock by any measure is significantly overvalued. That is the point. I don't Paulo would be complaining if Amazon had doubled over that stretch to $130 ... that is about what it is worth, but going up the same amount as Apple is insane.
Since the introduction of the iPhone Apple has generated over $110 billion in free cash flow, while Amazon has generated about $6 billion. Yes, this is the same metric Bezos has wanted us to value them on ... only $6B over 5 years. My bet is that Apple will generate more cash in CY13 than Amazon will do for the next 10 years combined.
Tepper stays bullish. Confounding gnomes who whispered the hedge fund honcho was turning cautious on stocks, David Tepper tells the CNBC crew the wave of liquidity that turned him bullish in the first place is getting even bigger. Fed tapering? So what, he says. The U.S. budget deficit over the next 6 months will only be $100B, while the Fed is scheduled to buy about $500B. That's $400B coming out of the bond market and going to investors who can buy more fixed-income, more real estate, more stocks. SPY erases losses and gets back to flat premarket. [View news story]
Paulo - we are looking more and more like Roma near the end of the empire. Amazing how history repeats itself. It took 300 years of bad economic/social policy to destroy Rome, this time it will happen much faster with essentially the same policies (we are already over 50 years in).
The US is now ranked 19th in the world in regards to economic freedom (from # 2 in 2000).
ChannelAdvisor Is Again Predicting Further Deceleration For Amazon.com [View article]
The Morgan Stanley note on internet sales tax is creating havoc with the stock this afternoon (though of course it is somehow coming back again now). This the worst news I can think of for AMZN, and this has already been supported by the data from states it already collects from.
Morgan Stanley: 11% of AMZN customers would never buy from AMZN again if they charge sales tax. Another 60% of customers would spend less.
Amazon Loses Money On Both Prime And Its Entire Direct Retail Business [View article]
Hi Sunil,
It helps their cash flow more than revenue for the Q as the full Prime revenue ($79) goes to "additions to unearned revenue" in the cash flow statement. They defer the revenue and recognize it over the term of use (so they recognize $6.58/month in revenue). AWS works in a similar manner (I wrote about this in a separate article: http://seekingalpha.co...)
This has been inflating their cash flow relative to revenue for a few years and is why Bezos wants you to focus on cash flow rather than net margin%.
ChannelAdvisor Is Again Predicting Further Deceleration For Amazon.com [View article]
Hi Michael, I did the same math and almost wrote a piece on it - but you beat me to it with the comments. My model shows no chance in Hell they can earn over 90c in Q4. The analysts know it as well, but they couldn't take down the entire year that much this quick. They will spread the drop over the next 3Q like they typically have done the past several years, to support the story.
Amazon Earnings Broadly As Expected [View article]
Gary,
That article on AMZN (by Arne Alsin) is one of the worst I have read - a true pumper w/o any backup for his argument.
Clearly the author had no idea how AMZN accounting works - he was wrong on almost every comment (how GM is derived , where the costs are, AMZN is not an online retailer????). It is clear he never read an AMZN Q or K, even though be claims to be a "Big 4 firm accountant".
His great method for valuation: just multiply sales by 1.8 every year .. there is no basis for that value presented (other than they have traded at that level before) .. earnings, growth rate, free cash flow, competition - irrelevant, just close your eyes and buy if it drops below 1.8x sales.
Amazon's Revenue Deceleration Probably Continued [View article]
Market reaction to this report was comical/typical as Amazon is currently up more than 1% on bad numbers vs. consensus estimates, and yet eBay, which had a huge jump up (not surprising following the bullish analyst day) is up 4x less than Amazon (up 0.25%). eBay should have been up over 1%, and AMZN down. But the insanity continues as the company that generates awesome profits with improved growth outlook lags the company with no earnings and reduced growth.
Amazon's AWS And The Public Cloud Paradox [View article]
IncomeYield, 96% of AMZN is breakeven retail business at best whose growth is slowing immensely and with intense resurgent competitors firing at it on all sides (eBay, WMT, Google, Apple, Target, Best Buy).
Go ahead and value the 4% AWS+digital business at almost any multiple you want with ridiculous growth prospects and you cannot value the whole of AMZN above $150-$180 (if you understand the dynamics of the on-line retail/consumer headwinds to profit).
I like the company as well, but the headwinds are too strong in many areas and the stock has gotten way ahead of itself. They have missed on results and guidance for the past 5 Q's, yet the stock is near all time highs ... It is set up for a correction soon.
Brian - you do need to spend some time analyzing the make up of AMZN's FCF ... once you do, the $330 price target will look laughable.
Since the start of 2008 AMZN has generated $6.3B in FCF. $2.2B is from stock based compensation, and $2.5B is from negative working capital. So 75% of FCF over the last 5 years is from issuing free shares to employees and pushing out payables (now to 74 days) to suppliers. That $2.5B or working cap gains is not legitimate FCF, as suppliers have claims to it.
All key operating metrics are headed in the wrong direction and sales growth is slowing. AMZN has never delivered on any profitability metrics, but yet everyone's model assumes they will - and they assume they will do it better than anyone else has (better than Walmart, Apple, etc) .... pure insanity.
"Here's a novel way to drive up a company’s share price," writes the NYT's Jeff Sommer. "Pay billions of dollars in additional taxes." Forensic accountant Robert Olstein reckons that companies such as Apple (AAPL), Microsoft (MSFT) and Cisco (CSCO) should repatriate the tens of billions dollars they hold abroad, pay tax on it, and then use the rest of the cash to repurchase stock. That would boost their share prices by at least 20%. [View news story]
A low repatriation tax may just be the best stimulus the US can have right now, but the current admin's ideology won't allow it.
Apple Has The Cash To Drive Its Shares Back To $700 [View article]
If you believe your stock is cheap and you have too much cash - why wouldn't you buy it back? .. no one knows better than the company what their stock is worth (they know the roadmap). By not buying back, they are telling the world they are not worth more than $420.
Is The U.S. Building An Unsustainable Welfare Support System? [View article]
The real sad fact is that this gives the programs a bad name and hurts the true needy and disabled. Everyone here knows it, and they look the other way. A sad way of life in the liberal NorthEast. The shrinking few supporting the many. It is unsustainable.
I really like the aggregation and cap idea - that is fair and provides incentive.
Investors Are Missing Apple's China Opportunity [View article]
- Apple revenue is 3x bigger,
- growth is higher (and has higher margin per $),
- AAPL book value is 15.5x AMZN,
- AAPL 2.6% dividend vs. AMZN 0%,
- AAPL current ratio of 1.5 vs. AMZN 1.1,
- $41.7B in earnings in CY12 for Apple vs. a loss for Amazon.
- Apple Earnings are expected to be 61,000 times larger than AMZN in 2013.
But yet Apple trades at only 1.98x AMZN EV
Amazon's Growth Is Shutting Down [View article]
(1) 1P e-com ($51.7B TTM revs) - value at WMT 0.50x = $25.9B
(2) 3P e-com ($6.8B TTM revs) - value at eBay 5.12x = $35.0B
(3) AWS & dig ($2.5B TTM revs) - value at RAX 8.27x = $20.8B
Total = 1.34x, or $81.7B (/461 shares) = $177.30
That is 35% less than today and I beleive will happen this year.
Something Is Definitely Broken With The Market [View article]
Since the introduction of the iPhone Apple has generated over $110 billion in free cash flow, while Amazon has generated about $6 billion. Yes, this is the same metric Bezos has wanted us to value them on ... only $6B over 5 years. My bet is that Apple will generate more cash in CY13 than Amazon will do for the next 10 years combined.
Tepper stays bullish. Confounding gnomes who whispered the hedge fund honcho was turning cautious on stocks, David Tepper tells the CNBC crew the wave of liquidity that turned him bullish in the first place is getting even bigger. Fed tapering? So what, he says. The U.S. budget deficit over the next 6 months will only be $100B, while the Fed is scheduled to buy about $500B. That's $400B coming out of the bond market and going to investors who can buy more fixed-income, more real estate, more stocks. SPY erases losses and gets back to flat premarket. [View news story]
The US is now ranked 19th in the world in regards to economic freedom (from # 2 in 2000).
ChannelAdvisor Is Again Predicting Further Deceleration For Amazon.com [View article]
Morgan Stanley: 11% of AMZN customers would never buy from AMZN again if they charge sales tax. Another 60% of customers would spend less.
Amazon Loses Money On Both Prime And Its Entire Direct Retail Business [View article]
It helps their cash flow more than revenue for the Q as the full Prime revenue ($79) goes to "additions to unearned revenue" in the cash flow statement. They defer the revenue and recognize it over the term of use (so they recognize $6.58/month in revenue). AWS works in a similar manner (I wrote about this in a separate article: http://seekingalpha.co...)
This has been inflating their cash flow relative to revenue for a few years and is why Bezos wants you to focus on cash flow rather than net margin%.
ChannelAdvisor Is Again Predicting Further Deceleration For Amazon.com [View article]
Amazon Earnings Broadly As Expected [View article]
That article on AMZN (by Arne Alsin) is one of the worst I have read - a true pumper w/o any backup for his argument.
Clearly the author had no idea how AMZN accounting works - he was wrong on almost every comment (how GM is derived , where the costs are, AMZN is not an online retailer????). It is clear he never read an AMZN Q or K, even though be claims to be a "Big 4 firm accountant".
His great method for valuation: just multiply sales by 1.8 every year .. there is no basis for that value presented (other than they have traded at that level before) .. earnings, growth rate, free cash flow, competition - irrelevant, just close your eyes and buy if it drops below 1.8x sales.
Wow - how does that stuff get published?
Amazon's Earnings: Visibility On Profit Margins Needed To Lift Stock [View article]
Amazon's Revenue Deceleration Probably Continued [View article]
Amazon's AWS And The Public Cloud Paradox [View article]
Go ahead and value the 4% AWS+digital business at almost any multiple you want with ridiculous growth prospects and you cannot value the whole of AMZN above $150-$180 (if you understand the dynamics of the on-line retail/consumer headwinds to profit).
I like the company as well, but the headwinds are too strong in many areas and the stock has gotten way ahead of itself. They have missed on results and guidance for the past 5 Q's, yet the stock is near all time highs ... It is set up for a correction soon.
Amazon Earnings Preview: Revenue Momentum Continues, Capex Growth Slowing [View article]
Since the start of 2008 AMZN has generated $6.3B in FCF. $2.2B is from stock based compensation, and $2.5B is from negative working capital. So 75% of FCF over the last 5 years is from issuing free shares to employees and pushing out payables (now to 74 days) to suppliers. That $2.5B or working cap gains is not legitimate FCF, as suppliers have claims to it.
All key operating metrics are headed in the wrong direction and sales growth is slowing. AMZN has never delivered on any profitability metrics, but yet everyone's model assumes they will - and they assume they will do it better than anyone else has (better than Walmart, Apple, etc) .... pure insanity.