Seeking Alpha

More on Amazon's (AMZN) Q4: The company swung back from its Q3 loss as North America sales rose...

More on Amazon's (AMZN) Q4: The company swung back from its Q3 loss as North America sales rose 23% Y/Y to $12.175B and International sales gained 21% to reach $9.093B. Growth in the company's Electronics segment outpaced Media segment sales. Free cash flow decreased 81% to $395M for the trailing twelve month period compared to a year ago with real estate outlays factoring in. For Q1, the company sees $15.0B-$16.6B in revenue and expects profit to fall in a range of -$285M to $65M. A conference call is scheduled for 5:00 EST. AMZN changes direction, now  +3.2% AH. (PR)
Comments (98)
  • Hitesh Patel
    , contributor
    Comments (314) | Send Message
     
    I guess that justifies a 3800 p/e
    29 Jan 2013, 04:25 PM Reply Like
  • AlexTalalai
    , contributor
    Comments (10) | Send Message
     
    No, it justifies that in case of Amazon nobody cares about P/E.
    29 Jan 2013, 07:09 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    I feel really bad for the shorts. All that fundamental analysis - for what? They could have just bought and held the QQQ instead.
    29 Jan 2013, 04:27 PM Reply Like
  • PSalerno
    , contributor
    Comments (3697) | Send Message
     
    Shorts must be managed. I am making money shorting AMZN.
    There are entry points and exit points.
    29 Jan 2013, 04:57 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    Why not make money buying amazon?
    29 Jan 2013, 05:05 PM Reply Like
  • divinecomedy
    , contributor
    Comments (466) | Send Message
     
    You can do it both ways. This thing someday will bring fortune in the other direction and even you can't deny it because well it happened before!!! But I am making money so far with my calls.
    29 Jan 2013, 08:34 PM Reply Like
  • PSalerno
    , contributor
    Comments (3697) | Send Message
     
    Too risky. Too much downside compared to upside.
    30 Jan 2013, 09:13 AM Reply Like
  • sheeple2012
    , contributor
    Comments (203) | Send Message
     
    wait until the houdini, i mean bezos conference call, will be @ 4000 p/e by 5:30 pm
    29 Jan 2013, 04:28 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    This is precisely why active investing doesn't work.
    29 Jan 2013, 04:29 PM Reply Like
  • XRTrader
    , contributor
    Comments (609) | Send Message
     
    Macro - why are you on an investing web site if active investing doesn't work? Just drip your money into the SPY and forget about it. No reason to read about anything. Specially not a blurb on Amazon's quarter.
    29 Jan 2013, 05:43 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    XRTrader, This web site has a section for ETFs too.
    29 Jan 2013, 05:59 PM Reply Like
  • footnotereader
    , contributor
    Comments (51) | Send Message
     
    Shorts are crying now but it will end in tears for the longs. Just don't know when.
    29 Jan 2013, 04:29 PM Reply Like
  • Kyle Spencer
    , contributor
    Comments (1013) | Send Message
     
    The essence of shorting something is to pick a time frame, don't you think?
    29 Jan 2013, 07:05 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    Active investing works for some - otherwise they wouldn't be good at it and win.
    29 Jan 2013, 04:34 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    It doesn't work for 90% of fund managers, and I suspect it doesn't work for 99.9% of retail investors.
    29 Jan 2013, 04:37 PM Reply Like
  • Ashraf Eassa
    , contributor
    Comments (8857) | Send Message
     
    Macro

     

    It's much harder to actively trade a 9 figure sum of money than it is for the retail investor to trade 5-6 figures.
    29 Jan 2013, 05:52 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    Ashraf, 9 figures is nothing man. I know people who have 9 figures in their own personal accounts.

     

    Anyway, did you get out of the AMZN short?
    29 Jan 2013, 06:00 PM Reply Like
  • Ashraf Eassa
    , contributor
    Comments (8857) | Send Message
     
    Yes. I was lucky and traded my way to break-even on this sucker.
    29 Jan 2013, 08:42 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    Good job! Don't short anything going into earnings, especially one that has popped on earnings every time the last few quarters. I wish Paulo covered too. It's a hard way to earn a living if you are going to short a train wreck.
    29 Jan 2013, 09:01 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (1472) | Send Message
     
    Cracks me up! They miss revs; they miss profits; they miss on guidance; they are making no money, and even the profitless revs are up just over 20%. Stock rallies up almost 10%! Bezos could announce that he has decided to give away free cars to get the revenue from selling customers new mats and this stock would rally! Congrats longs.
    29 Jan 2013, 04:35 PM Reply Like
  • veloce49
    , contributor
    Comments (13) | Send Message
     
    Initially down 15 or so, as it should have been, and then a quick reversal. The quintessential "buy and hold" stock. Doesn't matter if they miss or make estimates.
    30 Jan 2013, 05:05 AM Reply Like
  • chopchop0
    , contributor
    Comments (3241) | Send Message
     
    Until it does....
    30 Jan 2013, 08:13 AM Reply Like
  • WisPokerGuy
    , contributor
    Comments (800) | Send Message
     
    Amazon missed their revenue estimates... They missed their earnings per share estimate... And they guided lower for the next quarter. That is pretty much the trifecta. Yet Amazon's share price is UP 4% in the after market.

     

    I can't figure this stock out. I just don't know what keeps this thing afloat? In any case, I give up.
    29 Jan 2013, 04:35 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    Well done. Why gamble with individual securities? No one can predict what they will do. First AAPL, then this. Retail investors should just buy and hold index funds.
    29 Jan 2013, 04:38 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (800) | Send Message
     
    I get your point. When you make the same point over-and-over & time-after-time it doesn't make it your point any more or less valid. Give it rest Macro. We all get it.
    29 Jan 2013, 04:53 PM Reply Like
  • danzada
    , contributor
    Comments (136) | Send Message
     
    I think he's just trying to convince himself.
    29 Jan 2013, 05:05 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    Come on. When Amazon bears make the point over and over again that it is doomed to fail, no one complains even though the bears are wrong. I repeat something that it true and you get angry?
    29 Jan 2013, 05:06 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (800) | Send Message
     
    It's true for you. That's fine. I returned about 16% in 2012 trading individual stocks. If you can't do it, then that's okay. I'm not making a comment on your manhood. But to bash everyone with the same remark - MULTIPLE times in the same article - it just gets VERY old. We all get it. You favor index funds over stocks. Fine. Move on. One comment like that per blog is enough.
    29 Jan 2013, 05:43 PM Reply Like
  • shawndean
    , contributor
    Comments (53) | Send Message
     
    Two words - "BIZARRO WORLD"!

     

    This George Costanza "Opposite" episode has to end some time... soon please before my April 265 puts expire.
    29 Jan 2013, 06:20 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    Why not buy calls to hedge? God helps those that hedge themselves.
    29 Jan 2013, 06:33 PM Reply Like
  • Frank Quinn
    , contributor
    Comments (15) | Send Message
     
    Or sell weekly OTM puts to recoup your April 265 investment?
    30 Jan 2013, 06:38 AM Reply Like
  • Joe Razorback
    , contributor
    Comments (281) | Send Message
     
    UN Freaking REAL
    29 Jan 2013, 04:35 PM Reply Like
  • fallingwedgie
    , contributor
    Comments (23) | Send Message
     
    Lesson 1: Do the opposite of what you believe.

     

    Ex. If you think the earnings report is good, say you made 14 billion. Then Sell. If you think the company is outrageously over valued and is running a failed strategy that only leads to brick and mortar distribution centers then borrow on margin to buy long.
    29 Jan 2013, 04:38 PM Reply Like
  • anonymous#12
    , contributor
    Comments (552) | Send Message
     
    AMZN is the king of retail e-commerce, so it deserves a premium. That's all. Shorts should know this.
    29 Jan 2013, 04:40 PM Reply Like
  • sheeple2012
    , contributor
    Comments (203) | Send Message
     
    a premium to what, exactly ....and how much, roughly? please enlighten me as I am fascinated with your analysis so far
    29 Jan 2013, 04:53 PM Reply Like
  • anonymous#12
    , contributor
    Comments (552) | Send Message
     
    Tack answered your question.
    29 Jan 2013, 05:01 PM Reply Like
  • danzada
    , contributor
    Comments (136) | Send Message
     
    Except Amazon is easily replaced by Google's pay per click advertising.
    29 Jan 2013, 05:06 PM Reply Like
  • chopchop0
    , contributor
    Comments (3241) | Send Message
     
    Wal-mart isn't far behind. I'd rather own WMT at its valuation lol
    29 Jan 2013, 05:18 PM Reply Like
  • ReligiousWacko
    , contributor
    Comments (941) | Send Message
     
    Would stock double if AMZN declared bankruptcy?
    29 Jan 2013, 04:41 PM Reply Like
  • 215304
    , contributor
    Comments (615) | Send Message
     
    Of course not, that's crazy. It would at least triple!
    29 Jan 2013, 05:41 PM Reply Like
  • johnjakubowski
    , contributor
    Comments (170) | Send Message
     
    apparently, earnings and fundamentals mean nothing.
    we are in a post buffet-wonderland.
    29 Jan 2013, 04:55 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    Exactly right. So why keep losing money by claiming that fundamental analysis works?
    29 Jan 2013, 05:07 PM Reply Like
  • Atkins
    , contributor
    Comments (1038) | Send Message
     
    It's the Internet era. Of course earnings and fundamentals mean nothing.
    29 Jan 2013, 05:31 PM Reply Like
  • XRTrader
    , contributor
    Comments (609) | Send Message
     
    Hmmm, actually fundamentals DO matter, they're just mis-understood.

     

    AMZN grew their revs 20%+. They will have revs of 80 billion this year. They are a 125 billion dollar market cap. WMT has revs of 500 billion this year. They are a 250 billion dollar market cap. It's reasonable to assume that at maturity, AMZN will have margins near (or in excess of WMT) when they fully build out distribution chains. And, at the rate they are growing, it's reasonable to assume that in 10 years they will rival WMTs revenues.

     

    So, they could be a 250 billion + market cap in 10 years. That would be a stock price of of $550 or so....

     

    I think the market is front-running the growth somewhat, but it's not a bad retail story.

     

    Now, if it ran up to $400 in the next year, then I think it will be a great long term short, just by selling upside calls (assuming that they will never do much in excess of 500 billion in rev / year)
    29 Jan 2013, 05:51 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (18245) | Send Message
     
    Why is reasonable to assume AMZN will have margins like WMTs? AMZN has a bunch of costs that WMT doesn't share ... and those costs are intrinsic to AMZN's business - they're not going away.

     

    And unless revenue ACCELERATES, which is the contrary of what it's doing, it's not going to make $80 billion this year either. That was before the report, before AMZN warned it's slowing down.
    30 Jan 2013, 06:31 AM Reply Like
  • Tack
    , contributor
    Comments (12993) | Send Message
     
    The same people who don't understand AMZN, also, mostly don't understand GOOG. They probably didn't understand MSFT, either, back in its earlier days of its encounter with the first AAPL incarnation.

     

    In the long, rather than short, game, it's all about commanding the revenue stream and not about celebrating profit margins. Companies that celebrate profit margins, even if they appear robust in the early going, cede market share and the economies of scale to those that seek to monopolize the revenue stream, and worry less about the profit per unit. Eventually, the pressure that arrives because a competitor can sell multiple times as many units at far less profit per unit causes margin pressures on the companies with high margins, but less sales. Soon, suppliers do better deals with the higher-volume companies, and the lower-margin companies get squeezed, both in cost and in free sources of supply. It's a war of attrition that doesn't favor the smaller garden.

     

    In fixed-cost intensive businesses this dynamic operates much faster, and any company that cannot spread its fixed costs across higher volumes soon operates at a major disadvantage to the high-volume producer and literally finds its existence in peril soon enough. In businesses, like tech and most retail, the variable costs are much higher, so it takes longer for economies of scale to exert their force, but when they do, they're just as onerous to the lower-volume producers.

     

    The foregoing is precisely why Apple is now in trouble, as Samsung and Google (Android) expand sales at 4-5 times the pace of Apple. In fact, we already had one incarnation of this exercise, when MSFT buried AAPL by taking the vast market share in PC's, while AAPL played in their walled garden and celebrated their temporary high margins. It should have been instructive as to what might happen yet again with phones and tablets. And, it will get worse.

     

    And, it's why retailers far and wide, who have less favorable cost economics, will continue to wilt under Amazon's assault. Amazon's objective is to suck up all the air in the room, control commerce, then it can manage pricing with much more alacrity.
    29 Jan 2013, 04:58 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    Tack, my friend, you should really write some articles. You are SPOT ON!

     

    Thank you.
    29 Jan 2013, 05:08 PM Reply Like
  • Snoopy1
    , contributor
    Comments (1107) | Send Message
     
    I understand the fixed leverage argument, but what are the reasonable rev growth and margins?

     

    Using back of the envelope, if AMZN grows 2013 $80Bn revenue 20% for the next five years and achieves a normalized net margin of 5% ($10Bn), applying an 18x P/E gives $180Bn market cap vs. $130Bn now (@$285/share) or an expected 7% stock IRR.
    29 Jan 2013, 05:53 PM Reply Like
  • XRTrader
    , contributor
    Comments (609) | Send Message
     
    Macro - how can you state above that fundamental analysis and stock picking does not matter and then agree with someone who is advocating a bull case for AMZN?

     

    Disclosure: I don't have any position in AMZN. I have no interest in shorting it (see above). I agree that it's a tremendous revenue growth story, which will eventually be convertible into EPS.
    29 Jan 2013, 05:55 PM Reply Like
  • sheeple2012
    , contributor
    Comments (203) | Send Message
     
    wrong, there are no substantive barriers to entry in e-commerce by definition (didn't we learn this in 2000) hence they will never be able to "manage pricing"
    29 Jan 2013, 05:56 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    "Macro - how can you state above that fundamental analysis and stock picking does not matter and then agree with someone who is advocating a bull case for AMZN?"

     

    Fundamental analysis may not matter, but it may still be right. Tack's analysis is right.
    29 Jan 2013, 06:04 PM Reply Like
  • Tack
    , contributor
    Comments (12993) | Send Message
     
    sheep:

     

    What Amazon does and what they have achieved is both very expensive and creates huge economies of scale that no start-up could hope now to finance or achieve. The proof of this is that since Amazon's ascendancy not a single notable player has successfully challenged their e-commerce position or entered the market.

     

    In the 1990's, venture capitalists were financing all kinds of nutty schemes. Now, their sobriety in this space is comparable to mortgage lenders after the subprime fiasco.

     

    Hence, Amazon is and will remain unchallenged.
    29 Jan 2013, 06:14 PM Reply Like
  • Gene Chan, CFA
    , contributor
    Comments (214) | Send Message
     
    Tack, what is this favorable cost economics that you speak of that causes Amazon to lose money?
    29 Jan 2013, 08:23 PM Reply Like
  • WallStreetDebunker
    , contributor
    Comments (2383) | Send Message
     
    "it's why retailers far and wide, who have less favorable cost economics, will continue to wilt under Amazon's assault. "

     

    The important competitors aren't disappearing. Barnes & Noble had more revenue last year than ever in their history. Laggard Overstock.com had more income per share than Amazon last quarter--the best in a long time. Ebay is blowing away earnings estimates. Walmart is ramping up internet sales and making money while doing it.

     

    Amazon is a story stock excessively fawned over by technophile males who hate to shop in person (and also dominate Wall Street). If Wall Street were dominated by women, Amazon would be a sub-$100 stock.

     

    There are a million rationalizations for the stock price, but Amazon has never proven that they can generate income consistently. Some day that will matter. Until that day, the herd will come up with whatever rationalization they can think of. A long bull market has dulled the common sense of even the few intelligent investors in the stock.

     

    P.S. The comparison to Microsoft is ludicrous.
    29 Jan 2013, 11:52 PM Reply Like
  • CharlesGray
    , contributor
    Comment (1) | Send Message
     
    Well said Tack...

     

    I think it's worth mentioning that operating leverage breaks both ways though. There is no business hell worse than having huge fixed costs and contracting revenues. Razor thin margins are quickly overwhelmed by hundreds of millions in quarterly fixed costs and things get ugly fast.

     

    Your point about the challenges large new entrants face is completely valid. It's not going to happen. A more likely scenario in my mind is that a wave of states, if not all, will start to require sales tax collection for e-commerce companies over a certain size (as measured by revenue).

     

    Reasons this legal compromise is likely:
    - it appeases the small-business (primarily the national retail federation) lobby which is concerned about the burdens collecting sales tax at a different rate for every county in the country would place on small business

     

    - similarly, it will please the "keep it local" business lobbies (there are a bunch)

     

    - it still raises significant "revenue" (sorry, I still have trouble with the concept of using the word revenue as a substitute for taxes) for the government

     

    All of the sudden, the mom and pop shops across the country are price competitive again. Altogether, these shops will take back a huge chunk of amzn's revenue.
    Barring this, I'm not sure what derails this train.
    30 Jan 2013, 03:29 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (18245) | Send Message
     
    Tack, NONE of these stocks traded like AMZN is trading and none of them had imploding earnings either.

     

    Not even MSFT got close during the bubble - never had a multiple like AMZN's
    30 Jan 2013, 06:33 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (18245) | Send Message
     
    AMZN is not going to do $80 in 2013 for starters, that was before they warned the revenue was slowing down dramatically. AMZN's 1P revenues are already growing at just +18.5% yoy AND slowing down.
    30 Jan 2013, 06:35 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (18245) | Send Message
     
    Tack, economies of scale? You forget that AMZN's earnings story is predicated on 3P sellers. TINY 3P sellers of which there are 2 million+ of them and which mostly do their own fulfillment.
    30 Jan 2013, 06:36 AM Reply Like
  • Tack
    , contributor
    Comments (12993) | Send Message
     
    Paulo:

     

    The third-party sales are the best of all. They add almost zero to infrastructure costs. In essence, on an ROA basis, Amazon's share of this revenue is nearly free. That's the ultimate economy of scale.
    30 Jan 2013, 06:40 AM Reply Like
  • Timothy Phillips
    , contributor
    Comments (434) | Send Message
     
    Apple grew 18% last Q, Amazon grew 22%. Let's see what happens going forward but Amazon growth is slowing about as much as Apple's.

     

    The slowing is worse for AMZN as the amount of fixed cost they have added over the past 2 years is remarkable and is showing up as major issues in terms of opex (net margin is down as gross is up - but analysts ignore the bottom line - and apparently the top line now as well).
    30 Jan 2013, 08:24 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (18245) | Send Message
     
    But you can't say "AMZN is great because of these incredible barriers they are putting up with their infrastructure investment" in one phrase and "3P is great because it requires no infrastructure" in the next, right. RIGHT?
    30 Jan 2013, 08:29 AM Reply Like
  • Timothy Phillips
    , contributor
    Comments (434) | Send Message
     
    Tack, you couldn't be more wrong on that. Fulfillment expense is driven by 3P unit sales, and is the largest infrastructure cost of all. Last Q, e-com sales were up 21%, units up 32%, and fulfillment cost up 36%. That is the opposite of economies of scale - it shows that the fixed costs everyone refers to is actually highly variable.

     

    Also, Walmart has these distributed assets already in place and is far ahead of Amazon. They could do same day delivery almost without spending a dime if they wanted to (if they believe it is profitable).
    30 Jan 2013, 08:36 AM Reply Like
  • Tack
    , contributor
    Comments (12993) | Send Message
     
    TP:

     

    Perhaps, you could explain how 3P sales increase Amazon's fulfillment expense. One would think that Amazon is merely "taxing" someone else's sales.

     

    Walmart works because they are able to attract customers in huge volumes, allowing the more-units, less-per-unit-price model to work. How could Walmart be more efficient than Amazon in the home-delivery approach, when they have huge investments in bricks and mortar everywhere? If that were so, BestBuy should be eating Amazon's lunch.
    30 Jan 2013, 08:43 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (18245) | Send Message
     
    3P sales pay credit charges on the entire amount, they also pay commission charges on the entire amount.

     

    Sure, 3P is one of the better parts of AMZN anyway. But the aggregate is hardly profitable at all and the share trades for 1/2 of what AAPL is worth, which makes no sense especially with growth shutting down.
    30 Jan 2013, 08:45 AM Reply Like
  • Timothy Phillips
    , contributor
    Comments (434) | Send Message
     
    FBA through 3P drives up Fulfillment costs on a lower revenue per unit basis. It drives up gross margin by lowering operating margin.

     

    Amazon also has huge investment in Brick & Mortar - its called fulfillment centers. Their current plan to avoid the massive increases in shipping costs due to oil increases is build distributed FC's everywhere ... they essentially end up with local B&M like Walmart, but yet they still have to ship. This means inherent lower margin on each sale for Amazon than WMT.

     

    Look, I like Amazon, I just believe they are a 15-20% grower going forward on 2% net margin at its best (up from 0.5% in Q4). If the stock was trading at $160 I would be long the stock (as I was in 2011, early 2012 when it was down at that level)
    30 Jan 2013, 09:01 AM Reply Like
  • Tack
    , contributor
    Comments (12993) | Send Message
     
    TP:

     

    First off, allow me to say that I don't invest in retail stocks, so this discussion is merely academic for me. That said, I don't see how it is claimed that Walmart's model, by design, is more advantageous, as not only does Walmart have the distribution centers, they also have to support a huge local retail infrastructure, staff, etc. This B&M model is only more profitable depending on many variables in the equation, like product mix, COGS, margins, volume, etc. Obviously, Walmart has made its model work.
    30 Jan 2013, 09:37 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (18245) | Send Message
     
    Tack,

     

    1) You say AMZN has a great advantage because it is plunging huge amounts into infrastructure, then you say WMT sucks because it has huge infrastructure;

     

    2) If you look into WMT's or COST's P&L, you'll notice that its costs are LOWER than AMZN's ... sure, they have some additional cost from all the stores, but then they don't have to pick, pack and ship stuff for their customers, because the customers do it themselves.
    30 Jan 2013, 09:41 AM Reply Like
  • Timothy Phillips
    , contributor
    Comments (434) | Send Message
     
    Correct Paulo - Amazon model is inherently higher cost, but should be able to scale faster ... I moved out of being long the stock once oil got back over $90, and they had to change the plan to distributed fulfillment centers - which I believe now makes them both higher cost, and increases the cost of their growth (which ultimately will slow growth - as it has).
    30 Jan 2013, 09:59 AM Reply Like
  • Tack
    , contributor
    Comments (12993) | Send Message
     
    Paulo:

     

    1) Your comment takes my comment out of context. I said that Amazon's investment in the infrastructure for its type of business, as well as the market dominance it has now achieved, serve as a barrier to entry for other would-be e-commerce firms, which someone claimed anybody could do. Centralized-versus-dis... distribution is or is not more effective depending on volumes, pricing and product mix.

     

    2) Perhaps, the whole discussion of Amazon vs. Walmart is misdirected in the first place. Walmart's business is vastly different than what Amazon does, as it sells huge amounts of food stuffs, perishables, commodities, etc. This is not the business in which Amazon is engaged. If one would take away, Walmart's routine point-of-sale business, like food, which draws in customers often and repeatedly, they would find themselves in trouble versus Amazon, just as other retailers have. In fact, that's one of the reasons Walmart moved so aggressively into food stuffs because it served as magnet to get customers in their stores weekly or even more often.

     

    Yes, Amazon packs and ships, at least for their own fulfillment, and that may or may not be more efficient, depending on the item and sales volumes. To the extent that Amazon serves as an order taker for third-party sales, they're more like a taxing agency than a seller. They can expand that business endlessly at very low cost.

     

    My original point was directed at how a high-volume, low-margin business eventually puts great strain on those that cannot achieve the same economies of scale. As Amazon achieves a higher and higher proportion of sales, their economics get better and better, while various competitors (take BestBuy, as just one example) see their business model get worse and worse.
    30 Jan 2013, 10:06 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (18245) | Send Message
     
    AMZN can expand 3P endlessly, but just think - small sellers with inefficient fulfillment and paying a large commission to AMZN. How much of retail do you think that can out-compete? Not much, Tack, It will always be niche. A large niche, filled by EBAY and AMZN, but still niche.
    30 Jan 2013, 10:13 AM Reply Like
  • footnotereader
    , contributor
    Comments (51) | Send Message
     
    Unless my data is wrong, this thing has traded over $1 billion in after hours. Manipulated by da boyz since they can not get out without this thing going to real value of about 50.
    29 Jan 2013, 04:59 PM Reply Like
  • anonymous#12
    , contributor
    Comments (552) | Send Message
     
    Nicely said. Bravo, Tack!
    29 Jan 2013, 05:00 PM Reply Like
  • pman6
    , contributor
    Comments (270) | Send Message
     
    amazon makes no money, and stock is at all time high.

     

    I wish people could pay me to make no money.

     

    Investors cheer double digit revenue.

     

    Well, I could do that too by selling everything at cost. Huge revenue, no profit.

     

    5000 p/e ?
    29 Jan 2013, 05:24 PM Reply Like
  • Royals92
    , contributor
    Comment (1) | Send Message
     
    So $1.3B in EBITDA for the quarter is not making money? I get the PE angle everyone moans about, but to say they didn't make money is not accurate. In addition, EBITDA increased 44% YOY. Yes 44%! An LBO or PE investor will pay a HUGE premium for EBTIDA growth like that. Especially if they are the market leader and in a category with tremendous upside. Generating cash is what it's all about, not necessarily "earnings" which have various non cash items buried in it (e.g., depreciation, stock comp). All these people saying Amazon doesn't make any money clearly should not be investors if they don't even understand the basics of what making money is. Last I checked, it means "making money" (i.e., generating positive cash flow).
    30 Jan 2013, 04:52 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (18245) | Send Message
     
    AMZN's EBITDA has a few holes in it as well - check how they treat webtsite developments and internal use software. That's like $0.5 billion per year right there that gets transformed from cost into EBITDA (it ceases being an expense, gets capitalized and then depreciated inflating EBITDA and capex).
    30 Jan 2013, 06:40 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (18245) | Send Message
     
    And you wouldn't call it "operating cash flow" if AMZN paid employees in cash and then sold them shares, so why do you call it "op cash flow" when AMZN cuts one step and gves them stock directly?
    30 Jan 2013, 06:41 AM Reply Like
  • Joe Eifrid
    , contributor
    Comments (336) | Send Message
     
    Bloomberg earlier before earnings...
    Bloomberg editor Mark Gimen points out that Apple earned $13.1 billion in profits last quarter. From the time Amazon turned a profit in 2003 to the end of 2011, Amazon has earned $5.1 billion in profits. (From inception, adding up losses, it's ~$1.5 billion, says analyst Benedict Evans.)

     

    We want to say that again: Amazon's total profits are ~$5.1 billion. Apple did more than double that in the last three months.
    (Amazon's price-earnings ratio is currently a mind-boggling 3,275x. Apple's is 10x. Traditional valuation metrics are obviously pointless for Amazon, but if you were to use Amazon's PE for Apple, the stock would be trading at $144,618 per share, for a market cap of $136 trillion. Those numbers are totally meaningless, but it's funny to think about.)
    29 Jan 2013, 05:25 PM Reply Like
  • 215304
    , contributor
    Comments (615) | Send Message
     
    Joe, when you look at how the market punished Apple after it posted a record quarter for any non oil and gas company in the history of Wall St., and how it rewarded Amazon for missing on earnings, missing on revenue, and missing on guidance it makes you wonder if fundamentals mean anything at all. Amazon makes new highs and Apple goes in the tank. It's truly crazy and/or its truly rigged and criminal.
    29 Jan 2013, 05:51 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    "it makes you wonder if fundamentals mean anything at all."

     

    What do you think?
    29 Jan 2013, 06:05 PM Reply Like
  • enigmaman
    , contributor
    Comments (2686) | Send Message
     
    Amazon and Apple fundamental story brings to mind this

     

    Two kids were standing on opposite corners selling pencils, they both paid 3 cents a piece for pencils, the one selling his at a profit for 4 cents each couldn't understand how his competitor was making any money selling out his inventory, each pencil for 1 cent, so he went over to ask what the secret was, all his competitor said was "volume"
    29 Jan 2013, 06:49 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3641) | Send Message
     
    Macro, I realize-- after reading about 15 of the exact same comments in the same article by you-- that you are trolling.

     

    That being said- you are CORRECT that fundamentals matter little (to none) in trading.

     

    Are you also suggesting that they mean little to nothing in the long run?
    29 Jan 2013, 06:52 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    Yes I am. Fundamentals or technicals are for suckers in my mind.
    29 Jan 2013, 09:02 PM Reply Like
  • enigmaman
    , contributor
    Comments (2686) | Send Message
     
    I should have added, once the volume leader controls the market he controls pricing and stifles competition through the economy of scale
    30 Jan 2013, 08:22 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (18245) | Send Message
     
    The only volume market AMZN controls is in books.
    30 Jan 2013, 08:30 AM Reply Like
  • chopchop0
    , contributor
    Comments (3241) | Send Message
     
    Good luck trying to stifle WMT.
    30 Jan 2013, 08:30 AM Reply Like
  • Piptief
    , contributor
    Comments (314) | Send Message
     
    what a piece of crap...so they miss earnings and guide lower for the next quarter and the stock is up more than 8% AH? And it's npot even like they are actually making any money...but i guess the big hedge fund boys get what they want...you can't stand in front of a moving train...AMZN is being pushed up..so up it goes despite the woeful financial report...all of this based on supposed monetization in the future...lol..what a load of BS
    29 Jan 2013, 06:31 PM Reply Like
  • june1234
    , contributor
    Comments (2551) | Send Message
     
    Brazos is like Jobs or new YHOO CEO Mayer, they can do no wrong.
    29 Jan 2013, 06:42 PM Reply Like
  • AlexTalalai
    , contributor
    Comments (10) | Send Message
     
    Stock did not jump up on 8%, it just went back to the level were it was before that pre-Q4 hysteria. It means all is going as it is expected, no surprises.
    29 Jan 2013, 06:50 PM Reply Like
  • workhorse@bps
    , contributor
    Comments (51) | Send Message
     
    Never shorted a stock before, but amazon seems like a good pick. love their business but that is one pathetic P/E
    29 Jan 2013, 07:08 PM Reply Like
  • workhorse@bps
    , contributor
    Comments (51) | Send Message
     
    $aapl making oodles of money, growing, P/E around 10...Amazon will always be marginal, should trade like walmart
    29 Jan 2013, 07:09 PM Reply Like
  • workhorse@bps
    , contributor
    Comments (51) | Send Message
     
    prob wont short, i stick with longs, plain and simple. only trade companies I want.
    29 Jan 2013, 07:09 PM Reply Like
  • Kyle Spencer
    , contributor
    Comments (1013) | Send Message
     
    Amazon is being valued against the market cap of its competitors - at roughly 1/2 a Microsoft. It's also 68% institution-owned. Why bet against that and set yourself up for a short squeeze?
    29 Jan 2013, 07:11 PM Reply Like
  • BlueVelvet
    , contributor
    Comments (41) | Send Message
     
    FWIW, The short interest is just 2%.
    29 Jan 2013, 07:34 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (1472) | Send Message
     
    It does look rigged. They missed estimates on revs and net and guidance and how does Reuters call the headline? "Amazon shares set record after strong quarterly profit." They follow with: "Amazon.com Inc shares hit a record on Tuesday after it reported better-than-expected quarterly profit, fueled by the growth of higher-margin businesses during the fiercely competitive holiday quarter." Quoting an analyst (a real tough one) "It was a much better-than-expected gross margin, a strong forward indicator to drive margin expansion. What is really important is gross profit dollars and that line is stronger," said Ken Sena at Evercore Partners." BTW, gross margins were 24% vs 22% expected. I guess all of the misses were forgiven for the 24% gross margins? Go Amazon!!! I hope they can break $300 manana.
    29 Jan 2013, 07:48 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8921) | Send Message
     
    Breaking 300 would be sweeeeeeet!
    29 Jan 2013, 10:15 PM Reply Like
  • Clinton Holmes
    , contributor
    Comments (58) | Send Message
     
    Clearly the people investing in Amazon at this point know something I don't....
    29 Jan 2013, 09:54 PM Reply Like
  • angelamaas
    , contributor
    Comments (11) | Send Message
     
    Amazon sales were probably high in Q4 2012 because everyone thought the world *might* end on 12/21/2012 - so we all spent like there was no tomorrow....literally.

     

    I haven't bought anything on Amazon since. Plus, I won't be buying anything on Amazon once they start charging sales tax. Right now, it's a 7% savings (at minimum) for me to shop Amazon.

     

    Also, the video streaming options are junk. It's much cheaper to go to redbox or stream online for free.
    30 Jan 2013, 05:00 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (18245) | Send Message
     
    AMZN's Q4 2012 were much lower than expected.
    30 Jan 2013, 08:17 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|