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  • dutchboyinvestor dutchboyinvestor Mar 10, 2012 11:49 AM Flag

    Cash problem

    Sales growth hiding cash problem at AMZN

    Here is comparison of AMZN and COST net cash over past 2 years:
    2011 2010
    Cash 9,576 8,762
    AP 14,434 9,911
    Net (4,858) (1,149)
    Cash 5,613 4,749
    AP 8,637 7,840
    Net (3,024) (3,091)

    War on tablets and expansion of physical assets weighing on cash assets.

    Corporate headquarter expansion should eat up close to $1B in cash.

    If sales growth slows and the lack of cash will become more and more obvious.

    Therein lies the problem with running a high volume low margin business.

    Classic case of retail over-expansion in the works at Amazon.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • So today we learn they approach capital markets for $2.5B. Just the beginning. They will use over $1B to buy headquarters and then they need the other cash to continue to finance money loosing operation.

    • "Classic case of retail over-expansion in the works at Amazon. " Actually, you're totally wrong. Amazon has had huge growth for quite some time now, yet their site never goes down, they always ship stuff on time, they have very excellent customer service. If they did have a cash problem, they have lots of ways to fix it. They're the greatest company in America.

      • 1 Reply to brucetheharmonicaguy
      • Try to be forward thinking bruce - I said "in the works" Yes amazon has grown quite a bit and yes they can ship stuff that you order - but try to suspend the ceo worship for minute - at what cost does that service come to you? Right now it cost them about what they charge? What would happen if they attempted to raise prices? Demand would be destroyed very quickly.

        I like using amazon -its great. I also liked when the airlines were fighting each other and pushing down the cost of air-fare - but eventually they need to generate a profit to sustain the operations. That's exactly where amazon is today. If they don't cash will drain from the company - hence the title of this topic.

    • The Top analyst at Citigroup Just came on cnbc s fast money last week > He gave amzn a great big buy becuase Amazon has highest positive cash flow around He said amzn trades at just twenty times cash flow .He said beased on positve cash flow anazn should be priced 20% higher ..that would put amzn ay aprox 216 A short squeeze could take amzn much higher than that next week

      • 1 Reply to lggorillastock
      • I think you should study the financial statements instead of listening to cnbc - the analyst on cnbc is adding back to cash the change in AP - standard operating procedure when applying to traditional tech company. Does not work with large growing retailer like Amazon.
        Let me ask you, if Amazon has been generating this "free"/unencumbered cash in excess of 3B for last several years, why don't they have a warehouse of cash? (like apple) The answer is they don't generate "free" cash they generate working capital and each day that the their margin declines the growth their working capital declines and each day they spend cash on more warehouses and corporate headquarters and self branded goods like their tablet, there is less and less cash.

        When they start making more money - guess what will happen - cash will grow too - funny that happens in your life too doesn't it?

        You can grow your cash in your checking account if you simply charge everything to your credit card(AP). But you know you have to pay that credit card some day, right?

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