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Timothy Phillips

 
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  • "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.
    Mar 24 06:53 AM | 43 Likes Like |Link to Comment
  • 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.
    Mar 6 06:56 PM | 14 Likes Like |Link to Comment
  • Netflix: $35 Billion In Revenue Is Attainable By 2024 [View article]
    10 year forecast? you must be kidding. Analysts can't predict next Q for a company like this, and you want to go out ten years to draw some conclusions? Anything is possible - you could also make the case NFLX will be out of business in less than 10 years.

    This company's stock price is pure speculation as a trading stock - nothing more until the young streaming market shakes itself out.
    Jun 19 11:52 AM | 11 Likes Like |Link to Comment
  • Amazon Fresh: One Guaranteed Winner, But Many Potential Losers [View article]
    You're definition of success is ridiculous: "If Amazon can break even with Amazon Fresh, the company will succeed. No ifs, ands, or buts about it."

    You're point is that if they can break even on Fresh (which is a huge assumption on your part .. prove it), they enable more bundling through Prime and increase retail sales. So, let me get this straight - you want to them breakeven on Fresh so they can lose more than already do on retail? Oh, I get it, make up the loses on volume ...

    At some point, AMZN needs to focus on what it already has and turn it profitable - how about they prove that before they continue to distract themselves with new money losers. Any business that needs another unrelated business to turn itself profitable, is not a business at all.
    Jun 13 02:39 PM | 11 Likes Like |Link to Comment
  • Amazon: When Does The Trouble Begin? [View article]
    Bill,

    AMZN has begun its transition where it has to worry about cash flow and profits, rather than revenue growth, because as you point out, the balance sheet is in dire shape. We all knew this would come some day, as the low hanging revenue fruit has been picked and they need to increase the quality of their revenue, not necessarily the amount. There is no economy of scale with their prior growth plan (jumping into every growth business possible at the lowest price point).

    Most of their recent changes highlight this - increase in prime price, slowing of content deals, slowing of AWS price decreases, lack of new business announcements, increase in 3P seller fees, etc... With that, it is no longer appropriate to value AMZN on a price to revenue basis, valuation will begin to track their ability to deliver free cash flow and earnings. The market has proven this, as the stock has moved wildly on the notion of prime pricing changes.

    I think if you buy AMZN based on a P/S ratio disconnected from cash flow/EPS, you will get burned over the next year as the transition occurs. If they are valued on profitability, their P/S should be 0.5-0.7.
    Mar 18 08:04 AM | 9 Likes Like |Link to Comment
  • 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.
    Feb 27 09:30 PM | 8 Likes Like |Link to Comment
  • Amazon: It Gets Weirder And Weirder [View article]
    Ahhh .. just like old times ... they spend $1B in cash on a money losing operation that only generates $50m/yr in revs pushing their current ratio from 1.0 to 0.88, and they are rewarded by the stock increasing $8, or $4B in market cap. That is a 4x return on their cash in 1 day. Who needs profits or buying back stock when that kind of return is available?

    If this doesn't feel like 2010 I don't know what does.

    Every Q their stock gets crushed when investors look at actual performance. then the 90 days in between fluff and pump comes out and everyone dreams of profit that will never come.
    Aug 26 11:34 AM | 7 Likes Like |Link to Comment
  • Amazon And The 'Profitless Business Model' Fallacy [View article]
    Nickbritt - the evidence of your theory is right in the balance sheet. Amazon Inventory days has had a steady climb from 33 days (11.1 turns) in 2010 to 46 days (7.9 turns) currently. The spreading out of warehouses and ever increasing amount of items they carry is making them very inefficient vs. when they had a decent profit last (2010).

    Much has changed since 2010 to not allow AMZN to return to 4% operating margin - fulfillment/warehouse costs, gas has doubled (shipping cost per unit is way up), massive Tech & Content expense, etc...

    If you track Amazon costs, they all grow faster than revenue - there is very, very little fixed. If they haven't hit scale by now ($74B in revs) they won't. Hard to imagine there is some magical revenue number out there that makes costs begin to scale slower than revenue.
    Oct 27 10:00 PM | 7 Likes Like |Link to Comment
  • Amazon.com: The Mix Matters And Explains Most Of The Profit Implosion [View article]
    Paulo - don;t forget that shipping was at its bottom as a % of revenue in 2009 and 2010 due to gasoline being a cyclical low (it has increased 40% since then). Shipping has grown from 7.1% in 2009 Q3 to 8.7% last Q. That has removed 1.6% of the net as well, in spite of new "close to customer" FC's that should be reducing the shipping expense.
    Aug 23 02:57 PM | 7 Likes Like |Link to Comment
  • 1 More Reason To Hate Amazon's Valuation [View article]
    diggoman - AWS is less than 4% of revenues. I discussed the profitability of this in a prior article (http://seekingalpha.co...)

    Place any multiple you want on ~$2B in AWS revs, and the rest of the company valuation still does not make any sense by a mile.
    Jul 2 01:38 PM | 7 Likes Like |Link to Comment
  • Apple Is Fundamentally A Value Buy Even With 50% Drop In Earnings [View article]
    ValueTech - you just defined Amazon, except Apple actually has positive earnings and awesome Free Cash Flow (and is growing faster).
    Jun 7 11:37 AM | 7 Likes Like |Link to Comment
  • 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.

    But yet Apple trades at only 1.98x AMZN EV
    Apr 17 06:53 PM | 7 Likes Like |Link to Comment
  • Amazon's Growth Is Shutting Down [View article]
    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.
    Jan 30 12:04 PM | 7 Likes Like |Link to Comment
  • Amazon: Why The Giant (P/E Ratio) Must Fall [View article]
    Your analysis is correct NickBritt .. I have written about this a lot. AMZN is building out Fulfillment centers due the 2x increase in fuel cost over the past several years. THeir calculus was that the expense of the FC's was less than cost of fuel in shipping long distances (+ they knew there were going to need to pay sales tax anyway at some point). Because they are so low on capital, they have been leasing the FC's.

    There are two fallacies perpetuated by analysts on this front:
    (1) FC's are what is driving the CapEx spend and "investment" ... not true - the FC's are leased and are a real annual expense that hurts cash flow. Most of Capex is driven by AWS opex, software development, and content purchases. That spending will have to continue or growth stops, especially in AWS. There is no end to this spending for AMZN.
    (2) FC's will drive down the cost of shipping, and raise net margins. This has proven unequivocally false. Shipping costs continue to climb faster than revenue as shipping rates increase (and prime membership grows) and FC costs rise massively (due to inventory distribution costs, and the massive assortment of goods).

    Shipping and FC costs will rise faster than revenue on a consistent basis - there is nothing to stop the trend here. AMZN's only tactic is to increase the price of Prime to cover these increased expenses - and that is what they are doing. What will this do to growth?

    At some points these facts will become apparent to analysts, but for now they are blinded by the growth and awe of Bezos.
    Feb 10 08:43 AM | 6 Likes Like |Link to Comment
  • Amazon: When The Music Stops [View article]
    Bill - why does AMZN deserve a different P/S valuation than WMT(4x) or BBY (5x)? You didn't do a good job convincing of P/S being the correct metric: "This metric just seems better" ?.. P/S is fine if you believe a company earnings/CF are temporary being held down due to expansion, acquisition, etc.. but there is no proof (in fact you point to the opposite - penny pinching) that earnings will ever be there.

    The problem with a straight P/S on an unprofitable company is that you can have a huge valuation right up until the day the company goes BK. AMZN could drop prices 20% today in order to juice revenue further. In your model, you would raise your price target, while the company would run out of money in less than 2 Q's. If you are going to use P/S you should at least value less than WMT or BBY as they are profitable ...
    Sep 30 08:02 AM | 6 Likes Like |Link to Comment
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