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1 JeffFX  Tue, Jan 29, 2013 6:50:21pm

I’m not a stock guy, but if you’re confident it’s currently overvalued because of the jump, you have an opportunity to make some money betting against the stock.

I’d love to see you get rich and never have to worry about income again, because I know what you could accomplish.

2 Jocko's Rocket Ship  Tue, Jan 29, 2013 7:15:03pm

I’m not a follower of Amazon or the industry, so I don’t know the rationale for the valuation. But using a modest EBITDA valuation of 7x 2014 plus their $8b of net cash, it’s not that hard to get to the current valuation.

3 Skip Intro  Tue, Jan 29, 2013 7:20:59pm

Here’s a totally different take on Amazon today.

AMZN: Amazon shares set record high on profit fueled by Kindle e-books, video

The company also said fourth-quarter revenue rose 22 percent to $21.27 billion as it grabbed a big share of online spending during the holidays. But it was the profit that initially caught Wall Street’s eye.

“It was a much better-than-expected gross margin, a strong forward indicator to drive margin expansion. What is really important is gross profit dollars and that line is stronger,” said Ken Sena at Evercore Partners.

The gross profit margins were 24 percent in the fourth quarter, compared with Wall Street expectations of about 22 percent.

“Incredibly strong margins,” said Jordan Rohan, an analyst at Stifel Nicolaus. Amazon generated the highest quarterly gross margin in its North America business in more than three years, he noted.

Amazon mainly operates as a retailer, buying physical products at wholesale prices, storing them and then selling at a slight mark-up to consumers online.

But the company has expanded into other businesses that are potentially more profitable, including cloud computing, digital content and acting as an online marketplace for other merchants.

These newer businesses are growing faster than the company’s original retail operations, boosting profitability.

Link

4 andres  Tue, Jan 29, 2013 8:26:16pm

re: #3 Skip Intro

Here’s a totally different take on Amazon today.

AMZN: Amazon shares set record high on profit fueled by Kindle e-books, video

Link

Part of the issue is that Amazon isn’t clear on its numbers. For example, when Blizzard was adding new costumers to World of Warcraft, they boasted about those numbers on their earnings reports (sure, right now the bury those numbers in as many footnotes as possible, but that’s a story for another day). Apple and other companies do the same. But when Amazon says the Kindle Fire is selling well, they don’t boast with numbers.

It’s worrisome for investors, that’s for sure.

5 Destro  Tue, Jan 29, 2013 10:25:19pm

re: #3 Skip Intro

Amazon saw just $97 million in net profits in Q4. Yes, $97 million. That would be a big win for a company with $1 billion in revenue, but I’m probably not going out on a limb to say that it’s a red flag when you’re doing $21 billion.

Is it because they are undercutting the brick and mortar competition by undercharging for goods?

6 Timmeh  Tue, Jan 29, 2013 10:42:05pm

Were there any one-time charges taken?
Sometimes net profit may be down if the company is reinvesting a lot of money. This article says that although net profit was less than estimates, operating profit was almost double estimates:

Fourth-quarter operating income rose to $405 million, the company said, compared with an average estimate of $212.1 million. Net income fell to $97 million, or 21 cents a share, from $177 million, or 38 cents, a year earlier, Amazon said.

Amazon is the only company “that is able to leverage a global fulfillment network to drive disruption of traditional offline retail sales,” Scott Devitt, an analyst at Morgan Stanley, wrote in a note to clients. “The market is underestimating the long-term international sales opportunity and the cost leverage that will occur as fulfillment investments drive lower unit-variable shipping costs.”
E-Commerce Surge

The spending on fulfillment may help Amazon gain share in a worldwide e-commerce market that Devitt estimated will reach $1 trillion by 2016, up from $512 billion last year. By then, Amazon’s share will be 23.5 percent, pushing the company’s total sales to $166 billion, he projected in a Jan. 6 note.

7 JeffFX  Wed, Jan 30, 2013 5:41:41am

re: #5 Destro

Amazon saw just $97 million in net profits in Q4. Yes, $97 million. That would be a big win for a company with $1 billion in revenue, but I’m probably not going out on a limb to say that it’s a red flag when you’re doing $21 billion.

Is it because they are undercutting the brick and mortar competition by undercharging for goods?

I don’t think so. They wouldn’t operate at a loss, so perhaps you’re just used to being over-charged for goods to pay for showrooms and sales people.

8 Joanne  Wed, Jan 30, 2013 6:02:25am

re: #7 JeffFX

I don’t think so. They wouldn’t operate at a loss, so perhaps you’re just used to being over-charged for goods to pay for showrooms and sales people.

Amazon operated at a loss for years. I remember when they were a fairly new company, the analysts would rail them for not making a profit and continuing growth. They said they had no idea how it stayed in business, and they couldn’t ever wrap their minds around why Jeff Bezos was just such a golden child commanding investor dollars. Yet every year, they broaden what they do, their lines, their partnerships and here we are.

9 Destro  Wed, Jan 30, 2013 6:55:00am

re: #7 JeffFX

I don’t think so. They wouldn’t operate at a loss, so perhaps you’re just used to being over-charged for goods to pay for showrooms and sales people.

I don’t shop in stores anymore if I can help it and have not done so for years (though I may browse and test run a product in one before I buy it online). Why did you assume I did?

Also, it is clear Amazon is not operating at a loss. But they don’t make that much money over their expenses. So I wonder if that is because they don’t jack up the price of the goods they sell?

10 iossarian  Wed, Jan 30, 2013 8:26:35am

Is this another instance of a company making a healthy gross profit, but then magically paying “intellectual property fees” to some subsidiary in a low-tax haven and thus avoiding tax in their notional home country?

Starbucks did this in the UK last year. One phone call to analysts crowing about how much cash they were raking in, and then a tax filing that showed a large intellectual property fee payment to the Caymans, and zero UK profits.

11 Skip Intro  Wed, Jan 30, 2013 9:03:15am

re: #5 Destro

Amazon saw just $97 million in net profits in Q4. Yes, $97 million. That would be a big win for a company with $1 billion in revenue, but I’m probably not going out on a limb to say that it’s a red flag when you’re doing $21 billion.

Is it because they are undercutting the brick and mortar competition by undercharging for goods?

I don’t see who it is they’re undercutting. Much of Amazon’s sales now come from third parties who pay Amazon a percentage of their sales. Their prices aren’t particularly good; the key is you can’t find their items anywhere other than Amazon or other web sites. When I need specialized plumbing items, I can’t buy them at the local jobber any more; they won’t sell to me, but I can buy them through Amazon.

They sell big ticket items, but they sell them at the same price as other internet retailers. Add in that Amazon now collects sales tax in places like California and they’re actually at a disadvantage. Local businesses can compete with Amazon in CA now, if they choose to. Those that don’t are going to have trouble surviving.

12 Destro  Wed, Jan 30, 2013 8:27:14pm

re: #11 Skip Intro

I am not being anti-Amazon - I love their service. I am just wondering why such low profit margins?

13 Destro  Wed, Jan 30, 2013 8:27:52pm

re: #10 iossarian

Is this another instance of a company making a healthy gross profit, but then magically paying “intellectual property fees” to some subsidiary in a low-tax haven and thus avoiding tax in their notional home country?

Starbucks did this in the UK last year. One phone call to analysts crowing about how much cash they were raking in, and then a tax filing that showed a large intellectual property fee payment to the Caymans, and zero UK profits.

Ah! That makes more sense than Amazon having high overhead costs, etc.


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 Frank says:

I think "when" is a very important thing, but "what the f*ck!" is also a very important thing to ask. Just keep asking "what the f*ck?" I mean, why the f*ck bother? See what i mean? The important thing is, deal with the "when". "When" will open a lot of shit for you. "What the f*ck" really makes it easier to deal with it when you understand the "when".