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  • Amazon's Competitive Advantage Quantified [View article]

    You said you limit your analysis by cash conversion cycle. Ok. In this case, what do you think should be top line growth rate to keep up with financing needs? What would happen to AMZN if revenue growth goes to 10%-15%? Do you think the level of CapEx will remain the same?

    Do you think this advantage AMZN has (putting aside warehouses), is critical, given the current cost of capital? Will the same cash conversion cycle hold if cost of capital (for everybody) increases substantially?

    Thank you
    Jun 1 11:50 AM | Likes Like |Link to Comment
  • Amazon Is Not Overvalued - It's Still A Startup With Practically Boundless Opportunity [View article]
    A company may delight customers by providing outstanding product, outstanding service, or the best price.

    AMZN does not provide any outstanding product, unlike AAPL. Their service is now in line, or subpar to many other online retailers. Just try to get to a live salesperson, or/get quick answers to your questions....

    And, finally, their prices are not the best anymore. You can search multiple articles and discussions on this site and elsewhere to confirm this. Also, if you serious about researching this company, I would recommend you to look up the cases of showing higher prices to Prime members.

    Given uncompetitive prices, it is only brand recognition plus accounting tricks that keep the current revenue growth rate. How long would it take for the brand recognition to fade?
    Apr 22 06:55 PM | 6 Likes Like |Link to Comment
  • Is Doing Its Very Best To Increase Earnings [View article]
    On separate note, about Internet e-commerce evolution

    It is hardly arguable AMZN cannot compete with the likes of WMT and Costco on very high volume cheap items.

    It is very interesting how AMZN can compete with this breed:
    - relatively small, highly specialized in some specific segment of goods
    - offers huge variety of these goods
    - aggregates inventory from all/majority of manufacturers
    - presents and handles sales on par quality with AMZN, customer service is better
    - holds no or very small amount of inventory, all shipments come from manufacturers warehouses. No one-day delivery, but 3 days is common.
    - operates from one states or from overseas. Does not charge sales tax.
    - Shipments are free.
    - Lowest price available. Loyalty programs, frequent discounts and such.
    - Very low overhead.
    - Markets through Google shopping, eBay, other aggregators. I expect Alibaba to bring a lot of those to the US too.
    Apr 18 08:48 AM | Likes Like |Link to Comment
  • Is Doing Its Very Best To Increase Earnings [View article]
    My feeling is, the price increases are well underway. It would be really interesting to watch a grand battle between two customers main traits - laziness/brand stickiness versus rational desire to find a better deal. I am with the later, as my personal online purchases share on AMZN came from around 50% to around 5% recently.

    Yet laziness can prevail, at least for some time. In this case we would observe a period of substantially improved profitability coupled with not much diminished revenue growth. This may create another spike in stock price.

    Unless, of cause, they do some super grand stupid money wasting project like mobile phone, drones, or a tunnel from Poughkeepsie to Santa Monica.... Well, that can cause even grander stock price spite...
    Apr 18 08:15 AM | 1 Like Like |Link to Comment
  • Amazon's Secret Competitive Advantage And Payoff Characteristics [View article]
    Yes, that was my question to you. Pity, Google shopping did not work for you. I understand it became useful about three years ago. Before that there was Yahoo shopping, but now it is diminished.

    I use Google to compare prices among different stores. They used to list AMZN too, but it dropped some time ago, so I usually check AMZN separately. I suppose it is a sort of "cold war"....
    Apr 11 06:10 PM | Likes Like |Link to Comment
  • Amazon's Secret Competitive Advantage And Payoff Characteristics [View article]
    Thank you for the explanation. Question to you, as 3P seller on AMZN. Are you allowed to market and/or sell through other channels, like Ebay, or Google Shopping?
    Apr 11 03:31 PM | Likes Like |Link to Comment
  • Amazon's Secret Competitive Advantage And Payoff Characteristics [View article]
    You may be correct or not, I do not know these specific tax rules to the extend I can discuss them here. Yet, if you check all these sites, they indeed sell tax free. This is the fact. It is what it is. Some time ago, AMZN also was selling tax fee. Maybe they were breaking the law. Maybe these sites are breaking the law right now. But it is what it is. Does it create a competitive advantage? You guess. Does it make some AMZN shareholders uncomfortable? Well... If you are one of those, you can fight for AMZN and try to report me to authorities. )) If you just care about me being in compliance with law, then thank you very much, I absolutely will check what I need to file. Yet be assured, I will continue to buy from those sites, not from AMZN.
    Apr 11 09:46 AM | 2 Likes Like |Link to Comment
  • Amazon's Secret Competitive Advantage And Payoff Characteristics [View article]
    Just an empirical observation. I have been doing a large renovation project on my house. Bought all types of stuff on Internet, from bath tubs to handles and nails. AMZN only got about 5% of my total orders, as prices were simply uncompetitive. One order I made on AMZN was because of promise of fast delivery, and they missed on that.

    The best way to find the cheapest stuff is to search on Google shopping, and then browse through several best offering choosing the best combination of price, delivery time, and specific discounts. All was tax free. All was free delivery. AMZN charged taxes.

    After talking to several shops, I got the understanding of their business model. They are usually small, and physically operate in one state. No storage facilities, no showrooms, just an office, and computers - very small overhead. They are usually specialized, and have extremely good choice of the goods they are selling. Their expertise in that set of good is unmatched by a general store, be it WMT or AMZN. Support is online or over the phone, response to the customers is much better than on AMZN. Then, the system is connected to the manufacturers, and vast majority of the stuff is shipped from manufacturer's warehouses. Delivery time varies from 4-5 days to a couple of weeks, if an item is on special order.

    This to me is the true e-commerce. It would be really interesting to watch how this distribution chain would compete with AMZN, but, as of now, I have a feeling AMZN getting by mostly because size and brand recognition...
    Apr 11 09:06 AM | 13 Likes Like |Link to Comment
  • Bottom In Gold Likely To Be Below $770 [View article]

    I do not want to disappoint you, but believe me, USD value is also based on supply and demand! 1 USD will always be worth 1 USD, the same as 1 Zimbabwean dollar is worth 1 Zimbabwean dollar, and 1 oz GLD is worth 1 oz GLD. Yet what you can buy with 1 USD may differ.

    Regarding your thesis of $770 based on gold production costs - I urge you to read some research on it. On only SA gold bulls, but wall st sell side consensus put it around $1200...
    Feb 24 09:51 AM | 9 Likes Like |Link to Comment
  • Amazon Pullback A Potential Opportunity? [View article]
    Oh, but we are buying them today, do not we?

    If its fair value is only $320-$290 today, why to buy it higher today?

    If it is worth 2.0 LTM sales in February 2015 (a very big if), it does not mean it is worth the same amount now, I assume you know about the discount. More than that, in your very piece you showed how forward sales transform to LTM by loosing a lot in the process. Basically, now you are betting that the current forward sale estimate will hold, and the discount from a price a year in the future should be zero. For a company as unpredictable and volatile as AMZN. Given all the past history of estimates cuts.....

    Alternatively, you want to bet that the multiples will not contract or will expand during this year, as they did in the second half of last one. For a company close to the maturing stage of the business cycle. With all the history of previous estimates and misses.

    Well, your bet is your bet. Let's finish it here.
    Feb 3 01:55 PM | Likes Like |Link to Comment
  • Amazon Pullback A Potential Opportunity? [View article]
    Bill, I hate to get back to this, and I hate even more to school an experienced investor. But here is the math.

    In February 2013, AMZN Market Cap was $120b, FORWARD sales estimates - $79b, giving P/S of 1.5x. If we use the same P/S now, using current FORWARD sales estimate of 90b, and shares outstanding of 460m, it gives us share price of $290.

    In February 2013, AMZN traded at 2x price to LTM sales. If we use this ratio today, given LTM sales of 74b, it gives us market cap of 148b, and share price of $321.

    So, using exactly the same P/S multiples as it was a year ago, base on price to FORWARD sales, AMZN should be at $290; based on LTM sales, it should be at $320.

    I hope you see the difference between FORWARD and LTM sales.
    Feb 3 01:17 PM | 2 Likes Like |Link to Comment
  • Amazon Pullback A Potential Opportunity? [View article]

    This is akin to saying "in 2013 AMZN traded at 1300x P/E quite a bit. It means next year, by year-end it should also trade at this multiple. More than that, margins did expand a bit and should expand further in 2014."

    I'd like to conclude the discussion here. If you want to assign expanding multiple on a forward basis to maturing business, this is your choice. As always, we'll see how it plays out.
    Feb 3 12:19 PM | 2 Likes Like |Link to Comment
  • Amazon Pullback A Potential Opportunity? [View article]
    The range was 1.6 to 2.5 for the last 5 years. Important thing - these are for LTM sales, not for the forward number. If you use forward you should use lower multiple.
    It worth repeating - 2.5x and 2x were at the point where AMZN was smaller, earlier in the business cycle, had higher top line growth, higher margins, AND (!) had much higher forward estimates. Again, the sales for the multiple were LTM. If you look carefully, you'll see that even 1.8x were for the period that all the growth metrics were better than now. I would say many bears would not agree to assign 1.8x, so it does belong to bull range.
    Getting back to sum of parts. If you assigning the multiple to the total revenue, you would need to get comps that are very similar to AMZN on the total revenue basis, meaning the composition of business lines should be very similar. This gets us back to necessity to analyze sum of parts. If the company is "unique" or absolutely non-transparent (which is not the case even with AMZN), you can only compare it to itself historically. Then, my analysis would still be more relevant as it takes into account business cycle, while yours does not.
    Feb 3 11:43 AM | 3 Likes Like |Link to Comment
  • Amazon Pullback A Potential Opportunity? [View article]
    Bill, look, it's basics. The whole point in investment analysis is to determine a fair value. If you look at historic number, you cannot refer to one recent point. It is recency bias in its worst form. More than that, one point is inconclusive.

    Regarding your commenting on impossibility getting sum of parts. First, it is not correct, as even such non-disclosure as AMZN does provide basic info about business lines. Secondly, did not it occur to you that if one does not know such basic stuff as business lines, it is really impossible to value the company, and all discussion about it being "under" or "over" valued becomes void.
    Feb 3 11:11 AM | 3 Likes Like |Link to Comment
  • Amazon Pullback A Potential Opportunity? [View article]
    Giving them high multiple on the basis that "yesterday they traded higher" is, I would say, unreasonable. Referring to "analysts" that think AMZN worth even more, makes your analytical activity on SA quite redundant, as I was able to see those reports independently of your comments.

    In my previous post I showed that giving them 2x multiple is, likely, very far from "fair". So far, the only argument you provided against it, is just an illustration of recency bias. If tomorrow's market values AMZN at 1.3x sales, will you state tomorrow that it is also "fair"?

    Regarding the breakdown and %s changes in the future. It is uncertainty we have with every company. We can only use current numbers for current business lines. Still sum of parts valuation would be more precise comparing to assigning the single multiple to the whole top line.
    Feb 3 10:49 AM | 2 Likes Like |Link to Comment