I've been enjoying Matthew Yglesias's snark on this topic for a while [0]:<p><i>That's because Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers. The shareholders put up the equity, and instead of owning a claim on a steady stream of fat profits, they get a claim on a mighty engine of consumer surplus. Amazon sells things to people at prices that seem impossible because it actually is impossible to make money that way.</i><p>Earlier [1]:<p><i>If Amazon does have an evil Part B to its plan where it uses its monopoly status to jack up profit margins, that at least gives competitors a fighting chance. The real risk is that "sell the devices at cost and make it up on e-books, but wait, we don't make profits on those either" is all there is to the plan, and Amazon's investors have just unleashed a storm of locusts on the world that will ruin everyone else's profits.</i><p>...<p><i>But for consumers, it's great. An Amazon Prime membership is the most outrageously good deal in commerce today. But competitors should be afraid. It's an amazing deal and you can't beat it precisely because Amazon can't make it work, either!</i><p>[0] <a href="http://www.slate.com/blogs/moneybox/2013/01/29/amazon_q4_profits_fall_45_percent.html" rel="nofollow">http://www.slate.com/blogs/moneybox/2013/01/29/amazon_q4_pro...</a><p>[1] <a href="http://www.slate.com/blogs/moneybox/2012/11/05/amazon_destroyer_of_worlds.html" rel="nofollow">http://www.slate.com/blogs/moneybox/2012/11/05/amazon_destro...</a>
From the comments section on the article:<p><i>The Emperor has no clothes</i><p><i>The company missed earnings estimate (21 c instead of 29 c), missed on revenues, year-over-year, in 2012 net loss was $39 million, or $0.09 per diluted share, compared with net income of $631 million, or $1.37 per diluted share, in 2011. Free cash flow decreased 81% to $395 million for the trailing twelve months, compared with $2.09 billion for the trailing twelve months ended December 31, 2011.</i><p><i>The stock is trading at 295 times its free cash flow and free cash flow is not growing. IMO, the stock is worth at best a generous 30 times next year’s estimated EPS of $1.70, or $51 a share. Frankly, even the current consensus $1.70 for FY 2013 looks rosy, when the company makes only 21c in its best, holidays-sales quarter. E-Books or anything else that builds revenues without earnings, that is Groupon flavor “growth”. Sell-side analysts will have to come up with creative theories to justify their Buy ratings.</i>
one word: monopoly. investors are investing/speculating in the prospect of Amazon becoming a monopoly in online retail and potentially also cloud computing, both potentially several hundred billion dollar businesses. short term valuation analysis is missing the deep, almost unparalleled speculative nature of this stock.<p>the problem is the stock is priced so high now that this path is the <i>only</i> path where the valuation is reasonable.
AWS is contributing significantly to the revenue numbers:<p><i>"Other" revenue, which largely consists of AWS, had annual sales of $2.52 billion, up from $1.58 billion in 2011. "Other" sales were $820 billion in the fourth quarter, said Amazon.</i><p><a href="http://www.zdnet.com/amazons-q4-falls-short-of-estimates-outlook-misses-too-7000010513/" rel="nofollow">http://www.zdnet.com/amazons-q4-falls-short-of-estimates-out...</a>
10% jump is misleading. amzn dropped $8 in like the last second of trading. It's up more like 6%. (Or back to exactly where it started yesterday morning. :))
I'm doing my bit (for the UK business). Ordered a new TV, A/V amplifier and Bluray player, plus cables, mounts and sundries. It is no surprise at all that the traditional high street retailers are having a hard time - Prime is convenient, the range of goods is there, and the returns process Just Works - prices are almost irrelevant within an epsilon.
This part is funny.<p>First Quarter 2013 Guidance "Operating income (loss) is expected to be between $(285) million and $65 million, compared to $192 million in the prior year period."<p>So they're not even projecting profits for the future (except the range of $0-65 million).<p>I kind of get the game that Jeff is playing which is the $0 balance sheet but straddling that line is a dangerous business. With just under $3 billion in cash, any shift in the needle competition wise and you're screwed for a few quarters... I guess you could raise prices at that point?
I shop Amazon these days because I know no one else will be selling cheaper, because everyone else is looking to make a profit. Great for the consumer but I'm not sure what it'll mean for the retail industry as a whole when, in a decade's time, there's no one else left.