Amazon Creates A World Of Shorts

Summary

• Amazon has experienced spectacular growth over the last 18 years by growing from an online bookstore into a technology conglomerate that spans multiple industries.
• When Amazon enters an industry, it has used the formula of growing revenue rapidly with losses or slim margins in the hopes of eventually controlling the entire market.
• While Wayfair hopes to mimic Amazon's growth strategy, it does not have the capital to sustain a multi-year battle against Amazon, IKEA and other home furnishing companies.
• The issuance of new equity at Wayfair could come as soon as this year. That is the event that will likely send the stock plummeting.

In the run up to the dotcom bubble burst, an online bookstore founded by Jeff Bezos that virtually everyone in America now knows went public in 1997. At the IPO price of $18/share and after three stock splits (two 2-for-1 splits and one 3-for-1 split), investors would have done very well to have bought and held the split-adjusted $1.50/share stock over the last 18 years. At a little over $600/share today, that is over 40,000% profit during this period. This represents around 40% per year compounded return over this period. Of course, the name of this wonderful company that now sports a market cap approaching $300 billion and is widely considered to be one of the most innovative companies in the world is Amazon (NASDAQ:AMZN).

Over the years, I had considered investing in Amazon's money losing (or fringe profitable) business and always came to the conclusion that the stock was a bit overpriced. Every time I would take another look at the situation, the stock price had moved up significantly and I would again be wrong about the valuation of the company not being justified by its fundamentals and future growth. I was well aware of the transformation of the company from just an online bookstore or online retailer years ago, but I kept habitually underestimating the growth of Amazon and its ability to consistently become the top company in every sector it competes in. It is quickly becoming a conglomerate that spans retailing of all categories of items, cloud computing and streaming video. It will almost certainly attempt to enter other sectors in the future and it likely will have a great chance of being disruptive to any industry it touches.

For the hundredth time it seems, I believe Amazon is a bit overpriced at the moment. It would not surprise

Analyst’s Disclosure: I am/we are short W. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.