logicalthought

How to Value Amazon?

I actually said a "$2 billion" ad campaign (not $1 billion), that would be enough to put your message in front of everyone in the country a vast number of times. The message would be very simple: "We sell EVERYTHING 10% cheaper than Amazon, and we have all the same return policies, etc." I don't see how that very quickly wouldn't steal a vast amount of AMZN's market share. And as for the guy who said you could probably replicate their web site for $1 billion, but then would have to spend $1 billion a year to maintain it, I say "No, way." Even $100 million a year would probably buy you 2000 full-time programmers... Do you mean to tell me that AMZN employs more than 2000 people who do nothing but web site design? Besides, if AMZN is also spending $1 billion on web site maintenance and making money, this (theoretical) company should be able to do the same thing, and remember, the invested capital involved in this company is vastly less, which should provide a lot more pricing flexibility.


On Oct 26 01:37 PM dj10 wrote:

> Good point, but you omit the value of brand which conists of more
> than a one billion dollar ad campaign, but the value of a growing
> repeat customer base.
>
> Caveat: Short AMZN as of close of Friday.

How to Value Amazon?

AMZN has continued to amaze me in that it has nothing truly proprietary (not even the Kindle) and is essentially just an extremely well-designed web site backed by fulfillment warehouses. In theory, one could replicate the entire company (currently valued at around $50 billion) for, say, $3 billion, consisting of $1 billion to replicate the web site and warehouses and $2 billion for an absolutely ubiquitous ad campaign to build instant name recognition. Requiring, then, a return on just $3 billion of invested capital (vs. AMZN's $50 billion valuation), one could then theoretically underprice AMZN on just about everything, and therefore massively steal its market share. I don't understand why no one has ever done this, so meanwhile, lol, I continue to shop at Amazon.

E-Readers: The Fun Is Just Starting

Just watch as, over the next few years, the publishers (or maybe even the bestselling authors themselves) disintermediate Amazon and start selling their books directly from their web sites.

How Big Can the Kindle Get?

I think that AMZN is helping to sign its own book-business death warrant with this device. Over the next few years, lots of manufacturers will be making and selling them at much lower price points, and the book publishers will be cutting out the middle man; i.e., AMZN.

Why I Wouldn't Buy Amazon

>>Amazon.com is a great company that trades at a somewhat-ridiculous valuation.<<

So what else is new? Even now, it looks technically way overextended. (Check out the V-shaped recovery on a weekly chart.) However, I have had way too many "expensive shorting experiences" with this company, so I have finally vowed to just ignore the stock, and instead spend that money (I'd lose shorting) buying stuff from them!

Can a Stock Market Meltdown Happen from Here?

Where is the support (except from "gold bug websites") for calling this guy Heiko Seibel "a leading German stock market strategist"? I did some Googling, and apparently he works for a very small German brokerage shop called "CM Equity".

And, by the way, I'm not even saying that the guy's price target for the S&P is necessarily wrong-- I happen to think that there's a very good chance we'll get there simply based on continual quarters of earnings disappointments. All I'm saying is that you need to take ANYTHING published by a "gold bug" with a grain of salt (and I'm not even saying that the gold bugs will necessarily be wrong, but they NEVER think they could be wrong).

Amazon's Wheel of Growth

The primary reasons why Amazon is a great place to shop (great prices and free shipping) are the exact reasons why-- based on free cash flow or earnings-- the stock is grossly overvalued. The only way the company will ever make enough money to justify its valuation would be by raising prices and shipping charges, and if it did that, a huge chunk of its business would go away. (The great web site and customer service may be worth a SLIGHT premium, but when there's all kinds of competition just one click away, when I say "slight", I mean SLIGHT.) Would I short it? No way. It's a (semi) cult-stock, and you don't short cult stocks because you never know how long it takes for them to return to earth.