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Timothy Phillips

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  • Amazon's Growth Is Shutting Down [View article]
    I agree jhesr about RAX valuation ... it shows that even with the bubble we have in cloud companies today and apply that valuation to AMZN, they are still overvalued to that bubble analysis by 35% !!!!
    Jan 31 07:30 AM | 1 Like Like |Link to Comment
  • Amazon Missed On All 5 Key Metrics: Business Model In Jeopardy While Analysts And Investors Are Pleased [View article]
    You are right Paulo, fulfillment expense growth has exceeded paid unit growth over the last couple of years (therefore way outpacing revenue gains) - even though 3P offers a mix of outside fulfillment.
    Jan 31 07:26 AM | 2 Likes Like |Link to Comment
  • Amazon Missed On All 5 Key Metrics: Business Model In Jeopardy While Analysts And Investors Are Pleased [View article]
    Thanks for kind words HS,

    My model calculates Fulfillment expense based on its strong correlation to paid units sold / e-commerce ASP and gross margin% to mix in 1P/3P/AWS + a model I have built on shipping expense based on paid units & gas cost (there is a formula I have developed). Nothing too complex but it has predicted fulfillment expense and GM% fairly accurately over the past year (better than the analysts for sure) and drove my confidence in tracking the metrics above as leading indicators of where the AMZN model can end up once they become more "steady-state".
    Jan 31 07:24 AM | Likes Like |Link to Comment
  • Amazon Missed On All 5 Key Metrics: Business Model In Jeopardy While Analysts And Investors Are Pleased [View article]
    Thanks J.

    I have traded both sides of NFLX (I was a shorter from $200 down to $90), than a buyer when it went into the 50's and got out at $85 (missed this latest run). I do extensive research on the company, and may write something soon on my thoughts. While I love the product, I couldn't even imagine paying $170 /sh based on what we know.

    While I am an avid LNKD user, I do not follow the stock. I will check out your article on NFLX.
    Jan 30 06:40 PM | Likes Like |Link to Comment
  • Amazon Missed On All 5 Key Metrics: Business Model In Jeopardy While Analysts And Investors Are Pleased [View article]
    Ignored or not, they will have an impact down the road if the trends do not turn around. They concern me, you can decide if you think they are relevant. But I agree that in the short-tern they have not been an issue for traders or analysts.
    Jan 30 05:53 PM | 1 Like Like |Link to Comment
  • Amazon Missed On All 5 Key Metrics: Business Model In Jeopardy While Analysts And Investors Are Pleased [View article]
    The first Q's are answered in my article ... AMZN is trading Net Income$ for GM$.

    As for $0.46 "clean" ... it was the December Q when they are supposed to earn ~ 40% of their annual profit. Multiply 0.46x2.5 = $1.15 annualized run rate. P/E = 237, or an expected return of 0.4% on your investment .. is that what we're excited about here?
    Jan 30 05:50 PM | 2 Likes Like |Link to Comment
  • Amazon Missed On All 5 Key Metrics: Business Model In Jeopardy While Analysts And Investors Are Pleased [View article]
    One of my biggest critics (HarmonicaBruce) always says that the Price is the truth .. in the short-term he is correct - traders spoke and upped the stock a little on what I believe is terrible performance.

    Long-term, I feel my analysis will tell the real story of what is happening in the company.

    Look, I like Amazon as a customer experience and have respected the aggressive growth strategy (I even believe more in FCF$ than %'s to a point) ... but there is always a price for everything. If this stock was somewhere between $100 and $150 I would be long. Too much risk above that level.
    Jan 30 05:45 PM | 1 Like Like |Link to Comment
  • Amazon Missed On All 5 Key Metrics: Business Model In Jeopardy While Analysts And Investors Are Pleased [View article]
    Thanks, Thesuer. I think the analysts did get it wrong and misinterpreted Amazon's numbers. To all of a sudden focus on gross margin % (and gm$ growth) because that is the only improvement in the model in order to support their bloated target prices is an issue. Even Bezos himself said %'s are for losers. He is focused on FCF $, and against that metric AMZN does do not well. 75% of Amazon FCF$ over the past 5 years has come from extending payables to their suppliers and from issuing stock to their employees. Neither one is from value creation. With the fulfillment & shipping costs trend I point out here (+ massive content and tech cost trend), FCF from operations will continue to be pressured. The fact that their is no sign of return on the investments (the trends continue to move the other way) should warn analysts, but it has not.

    In regards to the stock price, I feel my job is conduct the analysis, point out the good and the bad and let people decide if they should invest or not. AMZN valuation sits on its own island, and is decoupled from every other metric but momentum. Traders own the direction I believe, not investors .. but that can change very quickly and wouldn't want to be holding long when that happens.
    Jan 30 05:39 PM | 1 Like Like |Link to Comment
  • Amazon's Growth Is Shutting Down [View article]
    It could have been worse ... currently trading (272) more than $4 under the Monday closing price
    Jan 30 01:41 PM | Likes Like |Link to Comment
  • Amazon's Growth Is Shutting Down [View article]
    Best Buy does the same thing and is driving fast growing e-commerce numbers.
    Jan 30 01:39 PM | 1 Like Like |Link to Comment
  • Amazon's Growth Is Shutting Down [View article]
    What is more likely is that the S&P heads back south at some point and some of the bubble valuations that Paulo has written about get reset - like the RAX and eBay current P/S are quite high .. if you knock those down to a more reasonable 3-4 level, AMZN valaution will get knocked down further from the $177, but there will be more revenue by then as well.
    Jan 30 12:51 PM | 2 Likes Like |Link to Comment
  • Amazon's Growth Is Shutting Down [View article]
    Agreed - lots of moving parts and it is certainly not a science.
    Jan 30 12:49 PM | 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 Earnings Preview: Revenue Momentum Continues, Capex Growth Slowing [View article]
    Payables increasing faster than COGS can be interpreted in many ways, here are the two most common:
    (1) companies can push payables out to preserve cash - this can sometimes mean that mgt is worried about future cash flow streams(ex: for capx or pending drop in sales or margins when current ratio is already tight) - can be a sign for investors
    (2) Company has purchasing power over suppliers and leverages that by changing payable turns (and uses it as a free source of short-term capital)

    For AMZN it is certainly #2, but there is a limit on how far that can go before suppliers move on to another customer. At 74 days, they must near that limit. If that is the case, don;t look for much more growth from this technique, and in fact the magnitude of WC cash benefit has been flat now over the past 4 years (1.6B, 1.6, 1.5, 1.5) - so the delta already is not growing with revenue - so that cannot be scaled over time anymore .. in fact with growth slowing so much it may decrease going forward.

    Even with all of that, this money is still owed to suppliers - although it shows as FCF, it is just a loan they receive that must be paid back.
    Jan 30 11:38 AM | 1 Like Like |Link to Comment
  • Amazon Earnings Preview: 5 Metrics To Watch [View article]
    I am almost done with the follow up article, but as a preview they missed miserably on all 5 metrics and the business model is in serious jeopardy. Read my article called "Average Sales Price is the Smoking Gun That Sinks the Amazon Business Model". This describes why the gross margin increase is actually hurting net margin. They will never get above 2-3% net margin based on the current plan and growth prospects. Even with all of the spending on Fulfillment centers, their gross margin is still less than WMT by 400 basis points - yet the analysts point to the improvement as why to keep P/S 4-5x high than WMT.
    Jan 29 06:22 PM | Likes Like |Link to Comment
More on AMZN by Timothy Phillips
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