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Tales From The Future. I picked my nickname because many advisors and investors claim they can predict the future of the (stock) markets and somehow pick the winners. I don't. I usually do not engage in short-term trading and myopic analysis (quarter by quarter, without looking at the big... More
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  • Amazon - A Public Company Or A Cooperative For Consumers ? 4 comments
    Jul 26, 2013 12:45 PM | about stocks: AMZN

    I can't make up my mind and answer this question - even more so after the latest earnings: All revenue with little to no net profits. This chart from April 2013 already made the point better than a thousand words:

    (click to enlarge)

    (Source: g.foolcdn.com/editorial/images/33816/amz... )

    It's easy to see: Apple made more money in a recent single quarter than Amazon over its lifetime a as public company.

    Yet Apple only enjoys a little over double the market cap of Amazon (400bn USD vs 150bn USD).

    And Amazon stock keeps ticking up. It's at all time-highs today at well over 300 USD. All this based on "cementing market dominance", "investing for the future", "cloud leadership", "establishing a leadership position in global e-commerce" and other terms analysts make up because they can't rationalize AMZN's valuation fundamentally at these levels.

    As one SA commenter jokingly commented today:

    Be happy $AMZN didn't declare bankruptcy. It would be over 500.

    I wouldn't touch this stock - rational people would probably like to short it on a fundamental/valuation basis, yet momentum buyers will probably keep buying it: AMZN stock has been going up with little to no breaks since November 2008 when it was trading under 40 USD.

    This is a no-win scenario for long-term investors in 2013. I would stay away from this stock for now and neither take a long nor short position.

    Themes: aapl, e-commerce Stocks: AMZN
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  • Tales From The Future
    , contributor
    Comments (5920) | Send Message
     
    Author’s reply » For a different take on AAPL, AMZN and low margins, have a look here:

     

    http://bit.ly/WKQX7w

     

    Needless to say, I don't agree with the author. But I would agree to: Amazon is great for consumers.

     

    I would just add the following:

     

    Amazon is great for consumers - but not for investors.
    26 Jul 2013, 12:57 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (5920) | Send Message
     
    Author’s reply » At the same time, I still wouldn't short AMZN. A great comment on SA from October 2012 about this:

     

    "Mr. Market is not a total fool. And if it is a fool, it is almost always only a fool in the short-term. Amazon is probably the only company that has ever been overvalued as much as it has been for as long as it has been. This should tell us something. And the something is, hey, guess what, it is probably not nearly as overvalued as us a-bears have thought."

     

    http://bit.ly/13cs1an
    27 Jul 2013, 10:48 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (5920) | Send Message
     
    Author’s reply » I always like to read opposing opinions and predictions. Here are two good ones on AMZN:

     

    "While We’re Trying To Follow His Game Of Checkers, Jeff Bezos Is Playing Chess"

     

    "But Amazon has no such problems on Wall Street. Again, they’re Bizarro Apple. They’re not showing their cards. While their businesses keep growing from a revenue perspective, profit has gone from negligible to non-existent to an actual loss this past quarter. And Wall Street loves them for it!

     

    Why? Two reasons.

     

    First, they know that Bezos is devouring Amazon’s profits by pouring them into infrastructure build-outs. Data centers, shipping centers, etc. These are one-time costs that should pay off in the long run."

     

    "Second, they believe that at some point in the future, Amazon will flip a switch and, voila, profit. In fact, Amazon has the ability to do it at almost anytime, as Bezos has made clear in the past, but people seem to forget. "

     

    "Forget profit, the emphasis has been on free cash flow since 1997...."

     

    And so I repeat, Bezos is a genius. He’s flying under-the-radar until he can buy the radar. And probably the company that makes all the radars as well. With Amazon, it’s not “now or never”, it’s “next”."

     

    http://tcrn.ch/11MqEOM

     

    And another article on AMZN crushing the competition's margins:

     

    "But what makes Amazon not just amazing but downright dangerous is that as a financial matter it has something even better than profits—the boundless faith of the investment community. You can think of a company's stock price as jointly determined by its profits ("earnings") and by Wall Street's level of optimism about the future, expressed as a price-to-earnings ratio."

     

    "That's just staggering. It means that Wall Street is on board with an Amazon business strategy that doesn't require it to actually make profits as long as it increases sales volumes. And if you're in any line of business where you compete with Amazon—and Amazon is in a lot of businesses, and seems to get into new ones each year—that should terrify you.

     

    In any line of business where you're earning healthy profits you always need to worry that a competitor will undercut you on price. But normally you can also have some confidence that they'll be restrained in their price cutting by the need to maintain profits of their own. Amazon is totally off the leash in this regard. Wall Street treats it like a brand new startup that just needs to think about growth and can find a viable business model later. Which means that if they come after you, you have no recourse. Your profits are going to shrink, and your investors are going to punish you for it but Amazon's profits don't necessarily need to grow proportionally. They just need to show they can poach your market share.

     

    Be afraid."

     

    http://slate.me/11Mqxmc
    7 Aug 2013, 12:30 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (5920) | Send Message
     
    Author’s reply » A well-known value investor opines in a similar way half a year later...

     

    CNBC clip featuring Bob Olstein discussing AMZN:

     

    http://cnb.cx/18YEfbG

     

    See last part of the segment, I think he's spot on about Bezos running a "charitable trust for consumers".

     

    For once, Wall Street helps Main Street by allowing AMZN to price items and shipping so low over the years. A rarity indeed.
    13 Dec 2013, 05:00 AM Reply Like
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