Author Topic: AMZN - Amazon.com Inc.  (Read 496253 times)

turar

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Re: AMZN - Amazon.com Inc.
« Reply #10 on: November 02, 2012, 09:48:00 PM »
Bezos doesn't care much about what Mr. Market thinks. I used to work there, and one thing he would always repeat during every quarterly "All hands" meetings is somewhat along the lines of "The stock price is going up, but it's not because we're so smart. And when it dives down, it won't be because we suddenly became dumb."  He's very long term oriented. Kindle took 5 years of development before it went public.

I would not recommend shorting AMZN at any point.
« Last Edit: November 02, 2012, 09:49:31 PM by turar »


JRH

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Re: AMZN - Amazon.com Inc.
« Reply #11 on: November 02, 2012, 10:40:04 PM »
The two questions armchair analysts seem to miss with Amazon:

1. What is the owner earnings yield?
2. What return is the owner getting on all that growth capex?
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AZ_Value

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Re: AMZN - Amazon.com Inc.
« Reply #12 on: November 03, 2012, 05:48:20 AM »
I will echo what my friends above have said and give my 2 cents: Shorting AMZN is a very risky endeavor. Tread carefully.

DCG

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Re: AMZN - Amazon.com Inc.
« Reply #13 on: November 03, 2012, 06:29:55 AM »
For anyone who thinks Amazon doesn't have a huge moat, try to start an online retail store and compete with them and report back in a couple years.
« Last Edit: November 03, 2012, 07:24:15 AM by DCG »

Cardboard

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Re: AMZN - Amazon.com Inc.
« Reply #14 on: November 03, 2012, 07:03:20 AM »
Shorting Amazon is dangerous because very few are critical of it. There is a fear of it because every short got burnt and the business is mysterious in some ways. It is amazing to me how much slack they are given and yes, it looks like CRM.

I find it funny. The guy was working for a hedge fund, knows how to value companies using free cash flow, talks about Ben Graham. Actually, he knows exactly what to do to ensure that Wall Street is never able to value it properly: fast sales growth, no earnings.

What they are doing is domestic dumping. It is illegal to sell goods into another country below cost. Since they are not a country, they get away with it. Now, when I am saying that they can do it because the stock market allows them to do it, it's because no one complains about a growing stock price and especially not employees who are compensated with it. This form of compensation also reduces their operating cash cost if you don't factor in dilution. They also love to exclude these charges from show cased operating cash flow. Ask yourself this question. If Wal-Mart decided to sell at cost tomorrow and to stop its dividend, what would happen to the stock price and what would the Department of Justice do?

So what is the business model here guys? Exterminate your competitors selling your products at cost, then raise prices once they are all gone? Then once you raise prices, another joker will go public, sell at cost forever until the first one is forced to compete?

I think that soon enough, its size will bring its own undoing. It gets more complex to manage, number of users growth declines. Like any other, they will try every trick to keep growth going and that is when they will make bad investments. Already, we are seeing the cash pile declining along with sales growth.

While I agree fully that this is not an easy short, there is something fundamentally wrong with this company and some day it will unravel.

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DCG

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Re: AMZN - Amazon.com Inc.
« Reply #15 on: November 03, 2012, 07:36:00 AM »
I agree that the current valuation is tough to justify - especially if you compare them to Walmart.

Amazon's market cap - $105B. Sales were $48B last year. Net income has averaged around $1B annually for the last 3 years.
Walmart's market cap - $244B. Sales were around $447B last year. Net income has averaged around $16B annually for the last 3 years.

The thought is that Amazon will eventually be able to stop spending to much and greatly increase their profits. Bezos is definitely looking to build Amazon for the next 100 years, not the next few years.


bargainman

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Re: AMZN - Amazon.com Inc.
« Reply #16 on: November 03, 2012, 08:40:02 AM »
Shorting Amazon is dangerous because very few are critical of it. There is a fear of it because every short got burnt and the business is mysterious in some ways. It is amazing to me how much slack they are given and yes, it looks like CRM.

I find it funny. The guy was working for a hedge fund, knows how to value companies using free cash flow, talks about Ben Graham. Actually, he knows exactly what to do to ensure that Wall Street is never able to value it properly: fast sales growth, no earnings.

What they are doing is domestic dumping. It is illegal to sell goods into another country below cost. Since they are not a country, they get away with it. Now, when I am saying that they can do it because the stock market allows them to do it, it's because no one complains about a growing stock price and especially not employees who are compensated with it. This form of compensation also reduces their operating cash cost if you don't factor in dilution. They also love to exclude these charges from show cased operating cash flow. Ask yourself this question. If Wal-Mart decided to sell at cost tomorrow and to stop its dividend, what would happen to the stock price and what would the Department of Justice do?

So what is the business model here guys? Exterminate your competitors selling your products at cost, then raise prices once they are all gone? Then once you raise prices, another joker will go public, sell at cost forever until the first one is forced to compete?

I think that soon enough, its size will bring its own undoing. It gets more complex to manage, number of users growth declines. Like any other, they will try every trick to keep growth going and that is when they will make bad investments. Already, we are seeing the cash pile declining along with sales growth.

While I agree fully that this is not an easy short, there is something fundamentally wrong with this company and some day it will unravel.

Cardboard

Have you read much about Bezos?  I'm really curious, it's an honest question.

You know this is exactly what Walton was accused of doing with Walmart back when they were growing.  He was selling for the lowest possible margins, and making it up in volume.  If you look here:

http://finance.yahoo.com/q/cf?s=AMZN

for 3 of the last 4 quarters, their cap ex has been higher than depreciation and both have been significantly higher than earnings.  So they are definitely putting all their cash resources into growth and being uber efficient.

Now with regards to the 'race to the bottom', this is really their competitive advantage.  I'm really surprised by their hiring.  To be honest I've heard it's a horrible, horrible place to work.  Not just in their warehouses but for their tech people too.  But somehow they seem to have some good people, so I'm not sure how they attract them.  Maybe you're right that the stock is one attraction, so wallstreet does give them an unfair advantage there.   The other thing is that good tech people will often work in horrible conditions because they want to have an impact.

Back to Bezos.. he's no dummy.  I'm pretty sure he will do the right thing and adjust.  If he doesn't see a growth opportunity any longer he will start to generate cash flow and allocate appropriately.  It's just that he sees a massive opportunity still and I agree they still have a massive opportunity.

LC

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Re: AMZN - Amazon.com Inc.
« Reply #17 on: November 03, 2012, 09:18:12 AM »
For anyone who thinks Amazon doesn't have a huge moat, try to start an online retail store and compete with them and report back in a couple years.

Here's another issue I see with Amazon, taken from the Western Union discussion:

Quote
Warren is somewhat obsessed with companies that can raise their prices on their customers.  e.g. if Moody's raised its prices, Berkshire would still pay the higher price for bond ratings.

If Western Union is lowering its prices due to its competition then maybe its moat/advantage is not that big at all.

Can Amazon raise their prices? I'm not so sure. Does that mean they don't have a moat? Not quite, if they are going to maintain themselves as the low cost/most reliable online retailer.

I think it's important to realize what type of company Amazon is trying to stabilize themselves as: the low-cost online retailer with amazing shipping service. Can they execute on this is the real story.
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DCG

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Re: AMZN - Amazon.com Inc.
« Reply #18 on: November 03, 2012, 09:43:22 AM »
For anyone who thinks Amazon doesn't have a huge moat, try to start an online retail store and compete with them and report back in a couple years.

Here's another issue I see with Amazon, taken from the Western Union discussion:

Quote
Warren is somewhat obsessed with companies that can raise their prices on their customers.  e.g. if Moody's raised its prices, Berkshire would still pay the higher price for bond ratings.

If Western Union is lowering its prices due to its competition then maybe its moat/advantage is not that big at all.

Can Amazon raise their prices? I'm not so sure. Does that mean they don't have a moat? Not quite, if they are going to maintain themselves as the low cost/most reliable online retailer.

I think it's important to realize what type of company Amazon is trying to stabilize themselves as: the low-cost online retailer with amazing shipping service. Can they execute on this is the real story.

They make up for low margins with scale. It's the Walmart business model, but online.

rimm_never_sleeps

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Re: AMZN - Amazon.com Inc.
« Reply #19 on: November 03, 2012, 11:36:48 AM »
amazon will be able to raise prices. the prime membership is an annuity stream that will rise with inflation. amazon also gets a % of sales that they help initiate through their reseller community (much of the fee tied to the cost of shipping). This will rise with inflation. In other ways they have already raised prices, even if it's in penny increments on stuff they sell. people pay a premium to deal with no hassle service of amazon. I do for sure. it may be $1 on a $25 item, but they pay a premium. Amazon is working on being the world's largest and most efficient distributor of goods. That's going to be a great business in an inflationary world.

Amazon has me in many ways. I am a prime member. I buy most of my stuff from them. I buy some stuff through reseller network. And I sell stuff I bought back to other customers on their seller's market. Amazon take a cut on each of these interactions as the fulfillment agent for some of their resellers and those who sell into the Amazon customer base.