Author Topic: AMZN - Amazon.com Inc.  (Read 651719 times)

link01

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Re: AMZN - Amazon.com Inc.
« Reply #270 on: October 26, 2013, 08:49:41 AM »
I think classic security analysis probably has the tools to decipher amazon's value, it just lacks the a culture among most of its adherents to find a different set of keys within its framework.

if warren buffett says Bezos is the best ceo in America, I for one don't take that statement lightly: I highly doubt that WEB would bestow that title on someone who wasn't creating real (as opposed to illusory) economic value for his company & shareholders.

Bezos & amazon is a uniquely different sort of beast vs most other businesses, for sure. and I think it will be many more years before amzn 'earns' profits. but it will also many more yrs before it pays any significant income taxes too. and if your co has still substantial growth opportunities in front of it that's a good thing: there will be perpetually 35% more 'profitless' cash flow dollars available to plow back into its businesses until that changes.

not only that. but amzn has a much longer time horizon that most co's do for ROI expectations on their new business ventures, between 5 & 7 yrs. in an interview with Charlie rose a couple of years ago Bezos said they are typically between loss & breakeven during that time because in amazons world they are scale-dependent. I wish I had a way of confidently estimating what portion of amzn's capex was maintenance & what part growth capex. so they are constantly carrying around a moving avg of 6 yrs of growth investment earning nothing, along with the operating expenses that also entails.

if nothing else its fascinating to watch play out.

http://www.kernelmag.com/features/report/4406/amazon-is-taking-over-the-world/#

http://timkastelle.org/blog/2013/08/innovation-lessons-from-amazons-shareholder-letters/



   



hellsten

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Re: AMZN - Amazon.com Inc.
« Reply #271 on: October 26, 2013, 09:23:23 AM »
Please excuse my ignorance, I'm going to play devil's advocate. I believe Buffett if he says Bezos is the best CEO in the US, but how much higher can AMZN stock go? AMZN market cap is close to Wal-Mart's. Isn't there a risk of a lost decade even if they become the next Wal-Mart? Wal-Mart's 10-year performance isn't good, competitors both small and large are catching up.

10 years ago who thought anyone could compete with Wal-Mart:
Quote
…over the next decade we forecast EBIT margin declines because of the inevitable increased competition with Costco  and Amazon , both of which have lower fixed assets bases and run their businesses at much lower profit margins. This, along with the ongoing share losses to the dollar stores, is the reason for our current negative moat trend for Wal-Mart.

http://quotes.morningstar.com/stock/s?t=WMT

Muscleman's point about the theory of reflexivity works both ways; what happens when Amazon is no longer growing or competitors adapt, won't the self-reinforcing feedback loop work the other way then?

Quote
The main similarity lies in a self-reinforcing process whereby inflated stock prices can accelerate an underlying trend, which in turn enhances expectations and inflates stock prices until the outcomes fail to sustain expectations and there is a crash
~George Soros

Has Amazon used the inflated stock price for acquisitions?

Compare SHLD's stock price to AMZN's between 2000-2013 and think about what the market was expecting from the two companies.

Maybe WinCo will eat the world:
http://business.time.com/2013/08/07/meet-the-low-key-low-cost-grocery-chain-being-called-wal-marts-worst-nightmare/

Does Amazon have a moat or are they just best, and first, at adapting new technology?

DTEJD1997

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Re: AMZN - Amazon.com Inc.
« Reply #272 on: October 26, 2013, 10:39:40 AM »
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Here is the right question. Amazon is obviously growing at all costs so how far can they grow without income before their market share is tapped out. At that point they can focus on profitability, and even if their net margin is a few percentage points like Walmart or Costco they will be immensely profitable. That is what the bet is when to amazon IMO. 

I'm sure I wasn't they only one thinking these thoughts.

Ok, if we assume that AMZN is going to turn profitable EVENTUALLY, but they will settle for a margin a few points LOWER than WMT or COST...they will still be making a TON of money!!!!

OK, lets look at those margins...WMT's net margin is about 3.6%.   COST's net margin is about 2%.   So AMZN is going to have margin LOWER than that by a few points?  That could arguably be right where they are at now, NOTHING.

The other problem is this.  I don't think ANYBODY would say AMZN is a small, startup company.  They have sales in the BILLIONS of dollars!  They have sales of $67 BILLION.  That is too small to scale into profitability?  WTF?????

Am I the only one to think that sounds like a cop out.  That they can't and won't ever earn any money and that they are selling naive and gullible investors a "scaling" story?

Just you guys wait!  Once AMZN's sales go over $200 BILLION, they will start earning 1% on sales and RAKING in the cash!   

OK, so AMZN starts making $2 billion, that equates to about $4.25/share.  So the future P/E will be 85?

Of course, Mr. Bezos is a very capable manager!!!  We simpletons who are value investors just don't "grok" what is going on and can't comprehend this new business model!

WHERE HAVE I HEARD THIS BEFORE?

ScottHall

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Re: AMZN - Amazon.com Inc.
« Reply #273 on: October 26, 2013, 10:44:36 AM »
Quote
Here is the right question. Amazon is obviously growing at all costs so how far can they grow without income before their market share is tapped out. At that point they can focus on profitability, and even if their net margin is a few percentage points like Walmart or Costco they will be immensely profitable. That is what the bet is when to amazon IMO. 

I'm sure I wasn't they only one thinking these thoughts.

Ok, if we assume that AMZN is going to turn profitable EVENTUALLY, but they will settle for a margin a few points LOWER than WMT or COST...they will still be making a TON of money!!!!

OK, lets look at those margins...WMT's net margin is about 3.6%.   COST's net margin is about 2%.   So AMZN is going to have margin LOWER than that by a few points?  That could arguably be right where they are at now, NOTHING.

The other problem is this.  I don't think ANYBODY would say AMZN is a small, startup company.  They have sales in the BILLIONS of dollars!  They have sales of $67 BILLION.  That is too small to scale into profitability?  WTF?????

Am I the only one to think that sounds like a cop out.  That they can't and won't ever earn any money and that they are selling naive and gullible investors a "scaling" story?

Just you guys wait!  Once AMZN's sales go over $200 BILLION, they will start earning 1% on sales and RAKING in the cash!   

OK, so AMZN starts making $2 billion, that equates to about $4.25/share.  So the future P/E will be 85?

Of course, Mr. Bezos is a very capable manager!!!  We simpletons who are value investors just don't "grok" what is going on and can't comprehend this new business model!

WHERE HAVE I HEARD THIS BEFORE?

Your post reads like that of a crazed hyena. Why not calm down? This isn't a life or death situation, you know.

Personally, I think Amazon fits well in to the TCI model.
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JAllen

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Re: AMZN - Amazon.com Inc.
« Reply #274 on: October 26, 2013, 10:45:49 AM »
Has anyone here read an AMZN 10-K?

ScottHall

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Re: AMZN - Amazon.com Inc.
« Reply #275 on: October 26, 2013, 11:33:24 AM »
Has anyone here read an AMZN 10-K?

I can't speak for anyone else, but I have.
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enoch01

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Re: AMZN - Amazon.com Inc.
« Reply #276 on: October 26, 2013, 11:57:46 AM »
Personally, I think Amazon fits well in to the TCI model.

Interesting - how so?  TCI had: built-in barriers to entry (the existing physical assets), the benefits of accelerated depreciation, scale of operations to increase bargaining power, and a virtuoso capital allocator.  Amazon has benefits of scale, and maybe Bezos has good capital allocation skills (hard for me to tell, although I don't know the company really well).  But what else?

What I underestimated for a long time was just how focused Amazon is on customer satisfaction.  That has carried them very far.

JAllen

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Re: AMZN - Amazon.com Inc.
« Reply #277 on: October 26, 2013, 12:43:53 PM »
Personally, I think Amazon fits well in to the TCI model.

Interesting - how so?  TCI had: built-in barriers to entry (the existing physical assets), the benefits of accelerated depreciation, scale of operations to increase bargaining power, and a virtuoso capital allocator.  Amazon has benefits of scale, and maybe Bezos has good capital allocation skills (hard for me to tell, although I don't know the company really well).  But what else?

What I underestimated for a long time was just how focused Amazon is on customer satisfaction.  That has carried them very far.


Scott is probably referring to the fact that TCI and Amazon both have CEOs that intentionally maximize expenses to maximize future cash flows, to put it succinctly.   

wellmont

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Re: AMZN - Amazon.com Inc.
« Reply #278 on: October 26, 2013, 03:47:06 PM »
Please excuse my ignorance, I'm going to play devil's advocate. I believe Buffett if he says Bezos is the best CEO in the US, but how much higher can AMZN stock go? AMZN market cap is close to Wal-Mart's. Isn't there a risk of a lost decade even if they become the next Wal-Mart? Wal-Mart's 10-year performance isn't good, competitors both small and large are catching up.

it can go a lot higher. insane valuations can get more insane. see 1999. and yes, it runs the risk of a lost decade or more.
« Last Edit: October 26, 2013, 06:15:13 PM by wellmont »

LC

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Re: AMZN - Amazon.com Inc.
« Reply #279 on: October 26, 2013, 04:55:59 PM »
Scott is probably referring to the fact that TCI and Amazon both have CEOs that intentionally maximize expenses to maximize future cash flows, to put it succinctly.

But that raises the question which is what started this debate in the first place: when will those future cash flows come, and how certain are you that they will be there?  Then, how do you analyze and price the answer to that question?
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