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  • cash2go cash2go Apr 27, 2007 5:09 PM Flag

    Cash flow, gross profit -vs- mirrors & smoke


    And despite the good news, there doesn't seem to be a fundamental improvement in the business. Gross profit margins deteriorated again, and marketing costs and inventories continued to grow more quickly than revenue. Cash flow from operations for the past 12 months was no higher than the previous year. Those are not signs of a company that offers a whole lot of value for its current share price.
    "If you disliked this stock at $32, you'll really hate it at $60," said Joseph Beaulieu, who follows the company for investment researcher Morningstar Inc. "There's nothing wrong with the business -- it's a great company -- but you need to know how much it is worth to you as an investor, and I don't think most people can make the case that it's worth a lot more than it is trading at now."
    Thank you to the TheStreet for posting a sane article. Short term it's a trader's game. Long term (2 weeks) expect valuation to determine the price. Staying liquid to short higher.

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    • > "Tax rate will will return to normal"

      What is normal tax rate if not what it is now?

      "Our tax provision for interim periods is determined using an estimate of our annual effective tax rate. The 2007 effective tax rate is estimated to be lower than the 35% statutory rate primarily due to anticipated earnings of our subsidiaries outside of the U.S. in jurisdictions where our effective tax rate is lower than in the U.S."

      So if earnings increase faster outside the U.S. in jurisdictions where the tax rate is lower, the overall tax rate could decline further.

      > "capex is going to rebound as competition is ever present."

      Amazon didn't decrease spending on technology. What they did was reduce the growth rate of technology spending which had grown 134% over two years. And even in Q1, the run-rate for technology spending was close to $750m/year which is considerably higher than the $662m in 2006. So I don't know what level you think technology spending is going to "rebound" to.

      > "Managment didn't guide investors wisely the last time it reached bubble valuations."

      Oh, yes they did. Jeff Bezos was famously quoted for saying the small investors shouldn't own Amazon and if they did it should only be a small portion of their portfolio.

    • It doesn't matter.

      Buying or holding AMZN isn't about investing in a business. It is about holding on to a scarce commodity that retail shorts will eventually be forced to pay any price for.

    • The Street and the Motley Fool are written by amateurs who are no better than most of the morons posting on this or any other yahoo board. They will say sell when you should buy, then tell you to buy when you should sell.

      In a few weeks or months, they will be telling you to buy AMZN at $100-$150, and that's when you should sell.

    • > "Cash flow from operations for the past 12 months was no higher than the previous year."

      There was an accounting rule change which reduced the past 12 months cash flow by over $100m compared to the previous year. Without the accounting rule change, cash flow increased by over $100m. But this is stil being myopic, since ttm cash flow has been rising rapidly after bottoming out 2 quarters ago. But guys like him won't notice the rapid increase in cash flow until it's too late.

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