"You had Amazon.com last week missing on quarterly earnings, sales and Q4 forecasted sales. I should not say missing earnings because they generated losses. The stock went down briefly after hours then up huge the next day. If it had been Chipotle or any other momo stock it would have been down 20%. Incomprehensible. They had to find some excuse for the move so they talked about some mysterious beat on operating margins. I guess it had to be NA adjusted operating margins!
I actually think that Amazon is a fraud. If the stock market did not keep it high, they would have to show profits like Target, Walmart, BestBuy or any other retailer. Retailing is still their main business. Now, that the stock market keeps rewarding them just for showing sales growth, they can keep selling product at cost or below cost. Isn't illegal? With the sales tax advantage disappearing and them building warehouses everywhere to shorten delivery times, there is really no difference anymore in their retailing business with other brick and mortar retailers. There are also other issues, but that is for another discussion or thread."
Well, here is the thread! This company should be shorted into oblivion by Einhorn, Chanos and all others if they had balls. The stock market allowing this company to sell its products at a loss is creating huge issues for honest companies such as Wal-Mart, Target, Best Buy and many others who have to sell their goods at a profit to offer a return to their shareholders. Even Overstock.com has to show a profit. Apple is also suffering from this scheme since they have to sell their IPads at a profit to deliver to their shareholders. Apple's price to earnings ratio is around 11.5 now without even factoring in the very large cash pile and they are growing as fast as Amazon sales. Amazon on the other hand can sell its Kindles at a loss or near breakeven to generate sales growth and still enjoy an increasing stock price. The issue is that this goes for all their products. All of that is based on gaining market share and eventually generating massive free cash flows as claimed by Mr. Bezos.
The math simply does not add up. We are talking about a $100 billion market cap retailer with around $62 billion in sales. This is as big as Target now in terms of sales. Moreover, they are already worldwide. As we have seen recently, the rate of sales growth is coming down despite their large investments in more distribution centers and their venturing into more and more fields. If it was a conglomerate, people would trade it at a discount until management decided to re-focus in certain areas. Regarding growth, they will bump against the law of large numbers as Wal-Mart did once it reached such sales number. I think we are at the beginning of this process.
If it was a small tech company or one with a truly innovative offering, I could understand the stock to trade higher based on sales growth and the promise of future profits at high margins. However, here we are talking about a company with a market cap of $100 billion plus, generating losses and with very low operating margins, and that is when they are visible. It is retailing after all. Try finding a $100 billion market cap showing no profit on on-going basis. The disclosure on top of that is abysmal. I challenge you to tell me how much debt they had on their balance sheet as of Sept 30. While it may not be so important a number to know, for now anyway, this kind of opacity is everywhere in their disclosure. Analysts have complained about it, but they still put out very attractive targets for the stock. Why exactly remains a mystery to me.
Their cloud division is another joke. While it is used by many startups and others, it does not appear to be generating much profits either. The game is all about generating more and more revenues at break-even. It kills competition and is only possible because the stock market rewards them doing that.
The music will stop some day. Will it be due to the collection of sales taxes, retailers matching their prices, an inevitable slow down in sales growth, the stock market finally taking a show me approach or some force finally telling Amazon that enough is enough?
Cardboard
