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  • dramatic_move_up dramatic_move_up Nov 14, 2012 10:38 PM Flag

    amzn longs are not giving in

    It's not about that, I saw the warehouses and robots. You had better hope cnbc does not run that clip again.

    The more these basher articles come, the more calls I buy.

    "Not only does Amazon sell through its website but it is now able to ship at little to no cost. Packages get there within a day or two (and it's getting closer to same day delivery). There is no other company that comes remotely close to this network. The scary part for competitors is that Amazon's lead is only growing bigger thanks to huge reinvestment in warehouses, robots that automate the actual shipping, distribution centers close to big centers like New York, etc." only part that idiot got right

    Sentiment: Strong Buy

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    • Yeah, 'cause FedEx and UPS move all those packages all over the world overnight with no distribution center automation or robotics.... Billions of Santa's helper elves do it all...

      So is what you are saying that Amazon should really be valued as a logistics company, one which moves a tiny fraction of the merchandise (napkin math... not even 10%) that UPS and FedEx do (no including what they move for Amazon)...
      - FDX market cap $27.4B, Forward PE 11, EV/EBITDA 5.16
      - UPS market cap $67B, Forward PE 13.7, EV/EBITDA 10.54
      - AMZN market cap $101B, Forward PE 126, EV/EBITDA 46.6 (note Amazon is worth more than FDX and UPS combined...)

      Of course, those two have basically completely built out their networks, which dwarf Amazon's in size.

      Given where Google Shopping is headed, I suspect it will help local merchants capitalize on spontaneous drive by / pick up sales while UPS/FedEx/existing local fulfillment companies could maintain minimalist maintenance safety stocks for each participating retailer in metro warehouses to drop ship (and yes, same day because they collectively have the existing infrastructure and scale to actually make the economics work) to houses for the balance that wanted home delivery....

      If so, Google's approach could/would align the incentives of the existing retail players and fulfillment players much better than Amazon's. It wouldn't require massive new investment but instead would get better utilization of existing assets and provide a much higher ROIC. But, then again, ROIC doesn't matter to Amazon nor its investors.... Only gross margin and unprofitable revenue growth.

      Again, 'cause no one but Amazon can do what it does. Never mind the fact that Google manages information/data as well as any company in the world and UPS and FedEx move most of the world's packages every day and existing retailers well, sell all the same stuff as Amazon and a bunch more.

      Amazon is caught in a middling strategy. (Mal)Investing everywhere. It doesn't know if it is a retailer, a consumer electronics manufacturer, a cloud service provider or a fulfillment company.... E) All of the above I guess... Load of synergies between being a cloud company and a physical fulfillment company (/sarc).

      The easy stuff (knocking out mom and pop retail stores all over the country by virtue of a tax subsidy it is now trying to kill since it also has to pay taxes in the most populous states and doesn't want other etailers to exploit the loophole to its detriment) is gone and now it has to go against bigger, better and much better resourced competitors in each and every area...

      Last comment, which INTC does is real robotics and precision manufacturing/engineering unlike anything else in the world. Man simply cannot manipulate matter at the nanoscale without the tools that INTC with others have developed. Man can pick, pack and ship. As real wages in the US decline, the optimal balance between capital and labor will shift in sectors where they can be substituted. And, as energy costs rise relative to other costs in the system, Amazon will see its competitive position erode further. As I said, these two companies provide a perfect case study as to how the capital markets and trading games are leading to massive malinvestment and undermining US competitiveness in the process.

      But, keep buying those calls. We need someone to....

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