Seeking Alpha

Timothy Phillips  

View Timothy Phillips' Comments BY TICKER:
  • Amazon Earnings Preview: Revenue Momentum Continues, Capex Growth Slowing [View article]
    The capitalization argument goes away when you track FCF instead of OCF.

    Here is an amusing stat for you: Apple generated more FCF last Q ($20B) than AMZN has generated in its entire existence ($8.2B).

    Think about that for a few seconds .....
    Jan 27, 2013. 05:17 PM | 2 Likes Like |Link to Comment
  • Amazon Earnings Preview: Revenue Momentum Continues, Capex Growth Slowing [View article]
    AMZN has about 33% market share of the US e-commerce sales, not 10-11%. If they reported total volume of 3P sales like eBay does this would be more obvious. Assuming 11% 3P commissions (like eBay), you need to multiply NA 3P sales by 9 and add it to their direct business and you get about 33% share. When you add in eBay's 16% share, already half of the US e-commerce market is accounted for - and e-Bay and Best Buy are taking share of the other 50% quickly.

    Everyone assumes there is massive market left for amazon, but they have saturated the NA space already (now only growing at 10-15% per year), and they are way behind competitors in other key markets like China - this is why their growth is starting to decelerate - law of large numbers is catching up to them.
    Jan 27, 2013. 02:48 PM | Likes Like |Link to Comment
  • Amazon Earnings Preview: 5 Metrics To Watch [View article]
    Thanks Bay320 and 215304 ... this side of the story needs to be told to a wider audience.
    Jan 27, 2013. 02:28 PM | Likes Like |Link to Comment
  • Amazon Earnings Preview: 5 Metrics To Watch [View article]
    That is the point and covered in much more detail in a prior article - that the business model is broken due to relying on shipping. No one wants to pay for shipping because you can go to your local walmart, best buy, whatever to pick it up for free. So Amazon covers it through Prime, but that cost simply continues to rise due to increasing energy costs (which get worse when Ben keeps on printing). So what does AMZN do? they build out fulfillment centers close to your home to lower the cost of shipping (to increase gross margin) - but this just raises their fulfillment costs higher than shipping decreases to lower net margin on higher gross, but this new fulfillment cost can be partially capitalized, which looks like a short term investment, so they can pass it by investors as such (but the terrible balance sheet and cash flow statements don't lie). Bottom line - they will have the same brick-and-mortar footprint as their old-line retailers on lower gross margin (due to shipping), so therefore by definition can never have higher net margin than Walmart for example. Walmart trades at 0.5 P/S ... Amazon should be lucky to be given that valuation, but trades at over 4x that right now.
    Jan 27, 2013. 11:52 AM | 1 Like Like |Link to Comment
  • Amazon Earnings Preview: 5 Metrics To Watch [View article]
    I also appreciate and act on short term technical analysis, but it is good for just that - short term trading, not investing. This article looks at the long-term viability of the company and what to look for in deciding if you should invest in the company, not trade. Amazon has been a great trade, but if they don't correct the five metrics in this article, they will become a bad investment.
    Jan 27, 2013. 11:37 AM | 1 Like Like |Link to Comment
  • The Double Impact Of Sales Tax On Amazon.com [View article]
    The catalyst that will burst the trading game Brigantine has described is sharp revenue deceleration (which has already begun to trend). This will happen either from what you describe Mark, or the tax/competition/fuel (and fulfillment) costs issues Paulo and I have been detailing. Most likely it will be a combination of both, as I believe both are happening simultaneously right now like a ticking time bomb ... how much time the clock has on the bomb is the $50B question.
    Jan 24, 2013. 06:10 PM | Likes Like |Link to Comment
  • The Double Impact Of Sales Tax On Amazon.com [View article]
    I'll bet you that the market cap went up more today (+$2.5B) than they paid for the company (and I am sure they paid a market premium as well) ... Investors must be real confident in that type of synergy they paid for on day 1 before any of it could be realized.
    Jan 24, 2013. 05:29 PM | Likes Like |Link to Comment
  • The Double Impact Of Sales Tax On Amazon.com [View article]
    it was reported in the news that both eBay and AMZN are benefiting today from Overstock.com's great quarter. I am sure it has more to do with Apple money moving to these momo stocks, but it would be amusing if Overstock taking share in the US e-commerce lead to AMZN going up (especially when we already know the total for US e-commerce, so anything OS got, came from AMZN potential). I have been keeping track of US e-commerce sales by companies who have already reported, and it looks more and more difficult for AMZN to hit required numbers in North America (Best buy, OS and eBay all gained Marketshare so far).
    Jan 24, 2013. 02:38 PM | 1 Like Like |Link to Comment
  • How Do Investors Value The Enigma That Is Amazon, And How Should They? [View article]
    Good article ... amusing reading the comments back in August when the stock was $234. Now five months later, the company is in worse shape (in almost every regard), and the stock is at $272. It just gets more bizarre ... you have to patient (and have lots of money) to be short this situation, but if you are, it will pay back when the bell finally tolls. Might be worth an article comparing financials now vs. the April release for when the stock starting heading to the moon - maybe if I have time.
    Jan 21, 2013. 02:50 PM | Likes Like |Link to Comment
  • Analyst Estimates Too Rosy For Amazon's 4th Quarter [View article]
    Yes.
    Jan 21, 2013. 09:07 AM | Likes Like |Link to Comment
  • How Do Investors Value The Enigma That Is Amazon, And How Should They? [View article]
    It looks more and more difficult for them to beat analyst estimates for the Q. I added up all of those that already reported e-commerce numbers for Q4 vs. comscore and AMZN has to get >104% of the US incremental $ left just to hit their midpoint guidance (which is below wall street). While it is possible (grab all remaining incremental + steal base from others), they have not done this in a while.
    Jan 20, 2013. 09:19 AM | Likes Like |Link to Comment
  • How Do Investors Value The Enigma That Is Amazon, And How Should They? [View article]
    Maintenance cost is not negligible - in their 10Q's they list their lease and capital obligations .. AMZN is currently sitting on $9.3B in off balance sheet obligations ($2.3B due this year). That does not count the cost of maintenance on their owned facilities - and electricity costs are not dropping to power and cool servers (+ the new depreciation of the new headquarters and 36 new fulfillment facilities). Their current ratio with these obligations off balance sheet was already down to 1.0, why do you think they needed to borrow $3B at a cost of $400M?
    Jan 20, 2013. 09:15 AM | Likes Like |Link to Comment
  • How Do Investors Value The Enigma That Is Amazon, And How Should They? [View article]
    While this presents a short opportunity, the article is not meant to be a call to short (you are right that the timing is always difficult). It points out that investor expectation appear to be too high, by a factor of two for company future performance. My recommended course of action from this would be to take some profits if you are long, and not to enter long if you are not already in. For those that like a risk/reward opportunity, at some point this is a good short play.
    Jan 19, 2013. 07:59 AM | Likes Like |Link to Comment
  • How Do Investors Value The Enigma That Is Amazon, And How Should They? [View article]
    HZLIU, check out my previous article (link below) on what has been happening to shipping costs and fulfillment cost per unit since 3P and FBA have taken off (you won't find this analysis anywhere else). It is driving significant cost for the company. The alternative of not building out the costly distribution centers was even worse due to increasing oil prices, so Amazon is in a bit of a corner here in terms of ever being able to drive reasonable net profit margins (dammed if they do, dammed if they don't). This is the whole key to what happens going forward - they have to save more on fuel than they are spending on fulfillment per revenue to increase profits.

    http://bit.ly/11ENnge
    Jan 18, 2013. 02:08 PM | Likes Like |Link to Comment
  • How Do Investors Value The Enigma That Is Amazon, And How Should They? [View article]
    Book value is currently $16/sh. My assumption in the article is that they finally reach consistent profitability, otherwise the valuation assumption is pretty simple - their value will be whatever book is at the time + brand value.
    Jan 18, 2013. 01:13 PM | Likes Like |Link to Comment
More on AMZN by Timothy Phillips
COMMENTS STATS
446 Comments
564 Likes