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  • A Quick Take On Amazon [View article]
    "I think it'll be very difficult for Walmart and others that built using the first model to compete with Amazon in the 2nd model. "

    Intelligent Speculator, the facts indicate that Walmart and Target are competing with Amazon in the second model and are winning. Both companies have much better net margins and profits than Amazon. They make enough money that they even pay dividends to share holders. Amazon on the other hand barely makes any money and can't even generate decent cash flow without stiffing it's vendors by paying them over 70 days out. The point is that even with those warehouses (fulfillment centers) being built in strategic locations the cost to ship goods directly to customers still outweighs the cost to build and operate local stores. Further proof of this-when WalMart was in it's high growth phase it still generated handsome profits, it never lost money. Amazon hasn't been able to do that because it's shipping costs are proportionally much higher compared to WalMart's brick and mortar costs.
    Apr 8, 2014. 11:12 AM | 1 Like Like |Link to Comment
  • Amazon: Are We There Yet? [View article]
    "From Yahoo Finance we know that for 2014, forty analysts expect mean earnings of $1.93, with a high estimate of $3.74 and a low estimate of $0.62. For 2015, thirty-six analysts expect mean earnings of $4.24, with a high estimate of $9.00 and a low estimate of $1.84. In respect to sales, for 2014, forty-five analysts expect mean sales of $89.88 billion, with a high estimate of $92.84 billion and a low estimate of $87.86 billion. For 2015, forty analysts expect mean sales of $107.59 billion, with a high estimate of $117.46 billion and a low estimate of $102.75 billion. It is clear that growth expectations are strong. And in fact on Reuters you can see analyst expectations for long-term (five year) earnings growth are at 49.79%, with a high estimate of 88.70% and a low estimate of 25%."

    What you fail to state is that for the last several year these same consensus analyst estimates have been consistently and hugely overly optimistic and wrong. In 2011 these analyst estimates called for Amazon to earn over $5 a share in 2012 and over $7 a share in 2013. Amazon ended up losing money in 2012 and earning $.59 in 2013. I don't believe the estimates in your paragraph for a minute. Amazon analysts throw out these great numbers and when they don't happen they make up new numbers that don't happen. Then every quarter like clock work Amazon misses on earnings, estimates are brought down, yada, yada, yada.
    Apr 7, 2014. 12:29 PM | 8 Likes Like |Link to Comment
  • A Quick Take On Amazon [View article]
    Michael, you've made an outstanding observation regarding e-ordering vs. e-commerce. In the early years of Amazon the meme was that Amazon would kill the WalMarts and Targets of the world because Amazon wouldn't have all that brick and mortar weighing it down. You don't hear that argument any more with Amazon, it kind of faded away when those old school brick and mortar companies consistently kicked Amazon's butt regarding net margins/profits. A large part of the reason in my view-shipping costs are far more damaging to the bottom line than brick and mortar. Amazon isn't in a profit funk because it's "investing in the future", it's in a profit funk because it's businesses are highly price competitive and it can't raise prices and it's shipping costs eat away at it's already tiny margins. Amazon's business model worked better when a larger percentage of it's sales was digital books/media that didn't require shipping, now EGM dominates, EGM requires shipping, net margins and net profits flirt with zero. Amazon's business model works for growing revenue but is flawed for growing profits.
    Apr 7, 2014. 11:44 AM | 8 Likes Like |Link to Comment
  • Amazon - What Is Changing The Decade-Old Rhetoric? [View article]
    Phil the Fluter, perhaps you are unaware of the unwarranted optimism and incredible inaccuracy of analyst estimates regarding Amazon's earnings growth in the past. In 2011 analysts said Amazon would earn over $5 a share in 2012 and over $7 a share in 2013. Amazon ended up losing money in 2012 and earning $.59 in 2013. I would take any future estimates of Amazon's earnings with a grain of salt. For the last several years earnings estimates have been brought down nearly every quarter, that trend shows no sign of abating. If Amazon earns $1 this year I'll be surprised.
    Apr 1, 2014. 05:41 PM | 1 Like Like |Link to Comment
  • This Is How Amazon Looks Historically [View article]
    I find it interesting that Amazon is the only mega cap stock (over $100 billion market cap) that analysts have to work to find some non traditional metric to justify the stock price because traditional valuations don't work. Why shouldn't Amazon be evaluated with the same metrics that are used for every other mega cap stock? When a company has been around for 20 years and has grown in valuation to over $150 billion my gut tells me the company should be earning reasonable profits. What happened to the theory that e-tailers had huge cost advantages over brick and mortar retailers like WalMart, and Target? Why was WalMart able to sustain profits during it's high growth phase but Amazon has not been able to do so? The answer may very well be that Amazon's business model does a great job at increasing revenues but is not suited to generating healthy net profits. Amazon's retail and cloud businesses are facing extreme price competition that make it difficult if not impossible to raise prices so it will have to find another way to bolster the bottom line. At some point the light will go on and Amazon will be judged with the same metrics that other mega cap companies are, the only question is when.
    Mar 30, 2014. 11:20 AM | 5 Likes Like |Link to Comment
  • Apple: Learn From Andy Zaky's Mistake [View article]
    Stephen, I second your comment. Andy, please get back to writing some articles for SA, I enjoy your analysis. Regards
    Mar 30, 2014. 10:41 AM | Likes Like |Link to Comment
  • Amazon: When Does The Trouble Begin? [View article]
    Bill, Amazon's profit potential is becoming more problematic. Many Amazon bulls have put their faith in AWS as the business that could swing Amazon into profitability but it looks more and more like cloud computing is being commoditized. Given the price cutting in the cloud business announced today by Google, Amazon, and others, margins are compressing significantly and profits are going out the door. This is going to put more pressure on Amazon from a profit standpoint. I really don't see how Amazon's profits can grow significantly given the highly competitive low margin businesses that it operates in. Price wars are great for consumers but not so great for companies' profits.
    Mar 26, 2014. 07:49 PM | 2 Likes Like |Link to Comment
  • Apple: Different Quarter, Same Prognosis [View article]
    "And about $300/share overpriced. TC too smart to buy this dog. "

    GRJ, bullseye. NFLX is in serious bubble territory at these levels, buying it would be a horrible waste of money.
    Mar 26, 2014. 10:45 AM | 5 Likes Like |Link to Comment
  • Why Apple Stock Is A Long-Term Investment Opportunity Right Now [View article]
    "Apple stock is ranked sixth among S&P 500 companies according to Portfolio123's powerful ranking system "All-Stars: Buffett". This ranking system is based on investing principles of the well-known investor Warren Buffett, and 15-years back-test has proved that this ranking system is extremely useful."

    And yet Apple is selling at a significant (50%) discount to the average P/E of the S&P 500. As of today Apple's P/E is 13.52 (much lower if you count the cash); the S&P 500 average P/E is 19.77, the mean P/E is 15.51, and the median P/E is 14.53. So Apple is in the bottom half of the S&P 500 from a P/E perspective. This leaves no doubt that Apple is a screaming buy at it's current price.
    Mar 25, 2014. 04:45 PM | 13 Likes Like |Link to Comment
  • Mapping Out Apple's Content Distribution Opportunity [View article]
    "Finally, with US440b in cash and short-term securities, an increase in dividend payout could attract investors that are looking for long-term yield. The current 2.4% dividend yield can hardly act as a catalyst, in my view."

    I think you meant US140b. Regarding your view that "At 12x FY14 P/E, the stock looks expensive given its 6% revenue growth and 8% EPS growth.", I find it difficult to perceive the notion that Apple is expensive when it is selling at a significant (over 50%) discount to the average P/E of the S&P 500. As of today the S&P 500 average P/E is 19.78, the mean P/E is 15.51, and the median P/E is 14.53.
    Mar 21, 2014. 05:31 PM | 9 Likes Like |Link to Comment
  • Apple's Future: iPhone Replacements? [View article]
    garysund, I'm in the same boat as you and most of my friends are as well. My At&T contract ends this summer and I'll definitely wait for the iPhone 6 and get it. I've upgraded my iPhone every two years (trading in or selling the old phone) and will continue to do so, the great resale value of iPhones makes replacement easy and inexpensive. When you consider the growing population of iPhone users that comprise a great iPhone replacement market with the large population of Android big screen users that may jump ship for a bigger screen iPhone, I believe the stage is being set for huge iPhone 6 and then iPhone 6S sales over the next couple of years.
    Mar 16, 2014. 03:59 PM | 4 Likes Like |Link to Comment
  • Estimating The Value Of Kindle Hardware Sales For Amazon [View article]
    Trefis, the bottom line is that you are guessing regarding the number of Kindle devices sold and the revenues gained from those sales since Amazon will not reveal the actual numbers. Maybe your guesses are accurate, maybe they aren't. Why Amazon chooses to be so secretive regarding it's performance is anyone's guess as well, but my guess is that any company that hides information from the investment community does so for one reason and one reason only, the numbers don't tell a good story. Of all the large cap companies on Wall St. Amazon is by far the most opaque regarding it's financial/quarterly reporting. It won't tell you how many Kindles it sells, it won't tell you what AWS's numbers are, etc. I guess I'm finished.
    Mar 12, 2014. 05:19 PM | 4 Likes Like |Link to Comment
  • A Few Reasons Why I Am Bullish On Amazon [View article]
    eenk, your point is valid and it shows the absurdity of giving an enormous P/E and valuation to a low margin retailer while at the same time giving a high margin tech company with the highest profits of any company on Wall St. with an inordinately low P/E. Amazon's revenue increases have no correlation with profits-in fact over the last three years profits have cratered from the all time high in 2010 despite significantly higher revenues. Yet Amazon's stock price has risen significantly since 2010 resulting in a P/E that is 3000% greater than the average P/E of the S&P 500 average. Apple has the highest profits of any company on Wall St. for three years in a row and sells at over a 20% discount to the S&P 500 average. Go figure.
    Mar 12, 2014. 10:49 AM | Likes Like |Link to Comment
  • A Few Reasons Why I Am Bullish On Amazon [View article]
    "According to a Research report, Amazon customers who own a Kindle spend $1,223 on Amazon products per annum. Amazon customers without the tablet spend only $790 per annum. This $443 gap means that the strategy of selling Kindle Fire tablets at near zero margins is working like a charm. By Keeping the Kindle device pricing low, the company is increasing its market share and creating an army of consumers who are spending freely on its products."

    The last three years have seen the rise of the Kindles. For the last three years Amazon revenue growth has declined and Amazon earnings have declined. So if Kindle devices have had a positive impact Amazon is in more trouble than I thought. The bottom line is that while Amazon is continuing to grow revenue and market share that growth is not translating to higher profits. Amazon's earnings are anemic by any standard; the company's low margin businesses make it extremely difficult if not impossible for profits to grow to the levels necessary to justify the current valuation.
    Mar 11, 2014. 12:32 PM | 5 Likes Like |Link to Comment
  • Apple Significantly Undervalued Compared To Google [View article]
    "I have been in the tech industry for decades and can't remember any company being as hyped up as Google."

    Gary, I agree with the fact that Google is incredibly hyped, but one other company that's over hyped at least as much is Amazon. Amazon barely makes any money at all and yet is valued at about half of Google and over a third of Apple. Yet last quarter Apple earned about 7 times the money that Amazon has earned in its entire history. Think about that. Amazon's free cash flow is a fantasy garnered by paying it's suppliers over 70 days out. Look at the hype that was given to that stupid drone idea and now the media is hyping a possible Amazon set top box and a possible smart phone. Apple has the most substance, solid earnings, balance sheet, pays a handsome dividend-Google and Amazon have the hype and love from Wall St. and the valuations to prove it.
    Mar 5, 2014. 11:23 AM | 15 Likes Like |Link to Comment