Author Topic: AMZN - Amazon.com Inc.  (Read 623649 times)

Liberty

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Re: AMZN - Amazon.com Inc.
« Reply #370 on: April 24, 2014, 12:28:39 PM »
Amazon Prime Pantry is pretty interesting.  Anyone tried it yet?

http://www.engadget.com/2014/04/23/amazon-prime-pantry/?ncid=rss_truncated

Maybe I'll give it a try in 10 years when it comes to Canada...

In other amazon news:

http://online.wsj.com/news/article_email/SB10001424052702304788404579521522792859890-lMyQjAxMTA0MDIwNDEyNDQyWj

Amazon, in Threat to UPS, Tries Its Own Deliveries

Quote
The future of Amazon.com Inc.  is hiding in plain sight in a San Francisco parking lot.

There, adjacent to recently closed Candlestick Park, Amazon is testing its own delivery network for "the last mile," the final leg of a package's journey to consumers' doorsteps. Trucks loaded with Amazon packages and driven by Amazon-supervised contractors leave this parking lot for homes and offices around San Francisco. Similar efforts are under way in Los Angeles and New York.

Delivering its own packages will give Amazon, stung by shipping delays last Christmas, more control over the shopping experience. The retailer will gain flexibility regarding when packages are delivered and help in containing shipping expenses, which grew 29% last year. As a percentage of sales, Amazon's shipping costs have grown each year since 2009, according to securities filings.

Just as important, the new delivery efforts will get Amazon closer to a holy grail of e-commerce: Delivering goods the same day they are purchased, offering shoppers one less reason to go to physical stores. With its own trucks, Amazon could offer deliveries late at night, or at more specific times.
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txlaw

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Re: AMZN - Amazon.com Inc.
« Reply #371 on: May 05, 2014, 06:47:06 AM »
WEB and Munger on Amazon (and Bezos):
http://video.cnbc.com/gallery/?video=3000272547

Laxputs

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Re: AMZN - Amazon.com Inc.
« Reply #372 on: May 05, 2014, 07:02:53 PM »
Help me with a hypothetical:

Suppose Amazon had owners' earnings (that is, cash flow from operations - maintenance capex) of 4 billion. That works out to 8.55/share. So suppose they trade at 36x OE.

If my hurdle rate is 10%, what kind of growth rate to they need to achieve for me to make the investment?


PatientCheetah

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Re: AMZN - Amazon.com Inc.
« Reply #373 on: May 05, 2014, 07:18:02 PM »
Help me with a hypothetical:

Suppose Amazon had owners' earnings (that is, cash flow from operations - maintenance capex) of 4 billion. That works out to 8.55/share. So suppose they trade at 36x OE.

If my hurdle rate is 10%, what kind of growth rate to they need to achieve for me to make the investment?

Multiple is a function of both growth rates and the duration of economic profits. Both Google and Amazon get high multiples because their moats are so deep that I can't see anyone becoming a competitive threat to them in the foreseeable future.
risk as little as possible until all the stars have aligned

Longer Term: FB MSFT BABA JD YRD

Laxputs

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Re: AMZN - Amazon.com Inc.
« Reply #374 on: May 05, 2014, 07:50:45 PM »
Suppose the multiple comes down to 15x fcf in 10 years. How much growth do they need between now and then to earn 10% a year?

PatientCheetah

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Re: AMZN - Amazon.com Inc.
« Reply #375 on: May 05, 2014, 08:36:49 PM »
15.5% if terminal multiple is 15x
12.6% if it is 20x
10.3% if it is 25x

solver is pretty nifty
« Last Edit: May 05, 2014, 08:44:30 PM by PatientCheetah »
risk as little as possible until all the stars have aligned

Longer Term: FB MSFT BABA JD YRD

JAllen

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Re: AMZN - Amazon.com Inc.
« Reply #376 on: May 05, 2014, 10:37:19 PM »
One thing to keep in mind about AMZN in addition to the sales growth rate is the gross profit growth rate, which is consistently greater than 30% (33% last q/q).  Would you rather have your sales or gross profit growing faster?  This is because gross margins have increased 600 basis points over the last four years and continue to do so with AMZN's increasing digital sales.


Something else that is instructive for us is looking at historical capex margins (say 2002-2009), and how amazingly low they were, prior to 2010.  You can then also look at the immense ramp in capex since then and ask yourself how much of the current capex AND expenses that are purely designed to give cash/benefits to AMZN's customers instead of paying 39.6% to the federal government are actually required to maintain the business. 


Another instructive thing is to look at AMZN's North American operating margins that are pressured since they expense more than half of their technology expenses in the North America. It makes perfect sense to stuff your expenses in the top corporate tax jurisdiction.


Also look for additional discretionary accounting and customer expense items, such as 'accelerated stock compensation' - much faster than the actual vesting schedule.


Would love to engage more about AMZN's financials with those who've taken time to understand their financials.  Last time I asked only one person responded that they had read their annuals.

Laxputs

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Re: AMZN - Amazon.com Inc.
« Reply #377 on: May 06, 2014, 12:12:56 AM »
Basically I think Amazon is a ground breaking company and I would like to own them but I suck at math and am wondering what kind of growth rate and multiple contraction result in at least 10% return on my investment.

If the above math is correct that they need 16% growth for 10 years, I am interested.

I really like this write up by Tarasoff:

http://www.scribd.com/doc/98208572/ValueXVail-2012-Josh-Tarasoff

Laxputs

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Re: AMZN - Amazon.com Inc.
« Reply #378 on: May 09, 2014, 03:08:59 PM »
Read through the 10-K and 10-Q. Trying to understand Amazon better. Some thoughts and questions.

1. Operating expenses were ~18% before 2010 and now around 25%, and WMT is below 18% If AMZN should have lower costs in these areas, can we deduce that much of the Advertising/Marketing, and Techonology/Content is in fact spent on growth? And does the massive spend on fulfillment centers as compared to prior to 2010 support that?

2. I don't understand their capitalization costs associated with internal use software/website development. They capitalized 581m for 2013 and amortized 451m for 2013 that was there from previous years. Does it make sense to amortize the capitalized asset if it is still productive? This is another non cash expense that takes away from a more accurate approximation of owner earnings.

3. If we apply similar cap ex spending of .5% of revenue that WMT spends on marketing, we get drastically lower marketing cap ex needs, and can deduce the rest is for growth.

4. Is investments in PPE including internal use software and website development (3.4M) on the cash flow, completely separate from Marketing and Technology and Content Expenses (9.7m) on the earnings statement?

5.What is a reasonable way to deduce how much of the Technology and Content spend is for maintaining their earning power and what percent is for growing it?

6. Is AMZN revenue comparable to WMT? AMZN records 40% on a net basis and 60% on a gross basis. WMT records 100% on gross basis. Therefore approximating net profit using WMT margins may not be accurate.

7. It can be said AMZN earnings are likely very far from accurate if we use comparable WMT maintenance cap ex spending, and make other add-back adjustments for amortization. A range from 3.8b to 4.8b on 2013 seems reasonable depending on how much cap ex we associate to maintenance versus growth.

8. Amazon showed consistent FCF margins of 6-10% prior to the massive fulfillment center build, 2010. Their high scalability should mean that those margins increase.

9. There are 20 outstanding lawsuits. Any concerns there?

10. Gross margins are increasing because of service sales increasing (AWS, advertising,  3P sales--less shipping costs and and general expenses, higher margins). Is that sustainable?

A couple of statements I like that I've read:
-Amazon has 8x the ROIC of the average company. 6x the earnings growth. And trades at 2.5x (normalized earnings) of the average company's multiple.
-If amazon charged 63 cents per shipment they would double their profits. Untapped pricing power. Who would care about paying 63 cents for shipping?
-There were 46 fulfillment centers in 2013, 23 were built in the last 3 years. That is enormous growth cap ex spending.

What's a fair multiple for a company with greater than 25% growth rate for the foreseeable future. Massive international expansion. That has very little competition. Has some of the most talented management. Has exceptional scalability. Has a virtuous cycle of lower prices, attracting more customers, offering more SKUs, attracting more customers, lowering prices, etc.; a strong moat. Has more deflationary costs than traditional competitors. Is growing a loyal customer base/unparallelled focus on customer satisfaction. Will have untapped pricing power when a focus on accelerated expansion slows. What multiple of approximate normalized current earnings provides a margin of safety if that multiple drops to 15x in 10 years?

Thanks.

Palantir

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Re: AMZN - Amazon.com Inc.
« Reply #379 on: May 09, 2014, 07:30:13 PM »
^Good post!
My Portfolio: AMZN, PAGP, FSLR, OKE, PYPL, RHT, MSFT