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Amazon (AMZN +5.4%) is now up strongly post-earnings, as worries about top-line weakness and...

Amazon (AMZN +5.4%) is now up strongly post-earnings, as worries about top-line weakness and aggressive spending get overshadowed by a rising gross margin. Growing sales of e-books, AWS server/storage capacity, and third-party merchandise (now 40% of unit sales) are contributing to the margin gains. Goldman thinks these trends will lead to Amazon's operating margin bottoming later this year, and reaching 3.7% in 2013. Nomura (previous) also forecasts rising margins. (transcript)
Comments (10)
  • Thalidomide Baby
    , contributor
    Comments (736) | Send Message
     
    I am quite disappointed in the lackluster performance of the stock today considering the excellent quarterly report. I still think we will see $270 a share/$120B market cap this year but I am not so sure we will see $300 until next year. : (
    27 Jul 2012, 12:23 PM Reply Like
  • RycheMykol
    , contributor
    Comments (352) | Send Message
     
    No kidding. At almost a 290 p/e its quite cheap!
    /sarcasm
    27 Jul 2012, 01:34 PM Reply Like
  • SoDamnLucky
    , contributor
    Comments (61) | Send Message
     
    And when you say excellent quarterly report you mean the fact that they posted $.01 EPS which missed by $.01? The eBook market is facing harsh competition from Google. I would not count on those gross margins to increase much more based on that.
    27 Jul 2012, 02:12 PM Reply Like
  • RycheMykol
    , contributor
    Comments (352) | Send Message
     
    Just for comparison, if AAPL was trading at a 290 P/E ration, it would be at $12,871 a share. lol.
    27 Jul 2012, 02:18 PM Reply Like
  • Thalidomide Baby
    , contributor
    Comments (736) | Send Message
     
    AAPL is a one-trick pony and their visionary leader died.
    27 Jul 2012, 03:05 PM Reply Like
  • seannie
    , contributor
    Comments (11) | Send Message
     
    Hmmm - that would be the visionary leader of the one-trick pony, or are you suggesting that all of the other ponies simultaneously died with him ? How much vision and leadership does it take to impart one trick to a small horse anyway ? Which trick is it that AAPL singularly holds ?
    So many questions, so little understanding. One day, with luck, you 'll shift from the latter to the former.
    27 Jul 2012, 03:24 PM Reply Like
  • Thalidomide Baby
    , contributor
    Comments (736) | Send Message
     
    Very frustrating performance today. I would have expected AMZN to break into new all-time highs. I guess margin calls will start coming in next week and we will see what happens.
    27 Jul 2012, 04:09 PM Reply Like
  • TruffelPig
    , contributor
    Comments (4100) | Send Message
     
    Margin calls will come in and drive the stock up???????? Man, please give me some of what you are taking.
    27 Jul 2012, 10:27 PM Reply Like
  • SA Editor Eric Jhonsa
    , contributor
    Comments (918) | Send Message
     
    You can make a good case Amazon is overvalued at these levels. But what those shorting it need to understand is that Amazon -could- be much more profitable than it is right now if Jeff Bezos decided to cut back on things like warehouse expansion, AWS capex, Kindle subsidies, and content purchases.

     

    Amazon is running near breakeven (and thus has a huge P/E) because management is choosing to run it that way for the sake of future growth. Not because the business is inherently unprofitable. A 26% gross margin on expected 2012 sales of $62B suggests Amazon could generate billions in annual profits right now, if that was management's main focus.

     

    That doesn't mean Amazon's strategy is necessarily the best one for shareholders. But the Street is taking it into account when valuing Amazon's future profits. And shorts need to as well.
    28 Jul 2012, 04:43 PM Reply Like
  • slickvguy
    , contributor
    Comments (498) | Send Message
     
    1) Even if AMZN put everything into earning profits, the current price is not justifiable.
    2) It's a nice story, but without profits, what's the point? There's a word for this: ponzi scheme.

     

    Quite remarkable. Amazon is a terrific company. But their financials and their potential in no way justify the current share price. Not even close.
    29 Jul 2012, 07:14 AM Reply Like
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