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  • cospringboard cospringboard Oct 25, 2013 7:39 AM Flag

    What shorts are forgetting

    17 billion in revenue is no joke. If things started to go bad then all Amazon would have to do is shed one of their many initiatives and generate cash. The street recognizes that 17 billion is a BIG DEAL. Shorts that have been trained to look at traditional valuations do not understand. This is not a "flash in the pan" this is a real company (a big company) that is changing the game. At some point in the future the price will become stagnant like all big companies but this will not happen until after profitability has been reached and growth has been slowed. Also, it will not lead to a 100 point drop like many shorts are hoping. It is a gradual metamorphosis (see microsoft, dell and apple).

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    • Hopefully you don't believe your drivel....17 Billion with operating margins of less than 2% is nothing but a supermarket...A supermarket has a multiple of 12 if they are lucky...Amazon hasn't been able to produce more than 4 % operating margins since inception and that was in early 2000....

      If I sell you something for a dollar and it costs me 99 cents Ive made a penny profit howver how much did it cost me to procure the product and pass that product to you? Well I will tell you for a fact it cost me more than a penny of energy and time..THAT IS A FACT....If you listen to the pundits and especially CRAMER THE PIG about how revenues are GROWING YOU ARE A FOOL...................REREAD THE EXAMPLE ABOVE AND PONDER IT.........

      • 1 Reply to lemmeknow23
      • Lemmeknow, first, we both agree that amzn is wildly over valued.
        I don't know about you, but I've lost money as a result of this belief.
        What if the market isn't valueing amzn based on earnings, but instead they are bidding it up on strong rev growth.
        What good would it do to short it?
        Finally, I was very fustrated by the markets reaction to the er as well. I made the same argument that amzn is showing rev growth by buying market share. Heck bezos has been quoted as saying "your margin is my opportunity". The market obviosly doesn't care at the moment.

    • Cospringboard, your point is well taken. I am like many on this board as I have a negative view on amzn and have lost $$$ as a result. Let me tell you, if you value a company based on earnings, amzn is a very fustrating company to try to understand.
      100% agree... 17 billion is a big deal. My problem is i've shorted amzn based on valuation rather than rev growth. I stand firm on the beleif that amzn is wildly over valued. But I will learn from this experience. I am going to start 1) looking for a signal that amzn rev growth is slowing or 2) the market starts to value amzn based on earnings.

    • First:The short interest is less than 3%...

      Second: Amazon has been a public company for 17 years and have generated less than 2.5 BILLION IN PROFITS for its shareholders...AAPL does this 2.5 billion in the first month of any given quarter for the last 5 years and is spending copious amounts of cash on expansion globally......

      Third: Operating margins have been declining for over 3 years and are currently around 1%...Even IF THOSE MARGINS HEAD TO 4% OR 5% THIS COMPANY is still over valued by 175 points....

      Fourth: Collusion between Wall Street and Amzn have proven to be the catalyst for this fraud we know as Amazon....

      Fifth: Amzn balance sheet is riddled with holes...Their intangibles are piling up and they had to borrow money for expansion...Borrowing money in a business with 1% operating margins with 17 billion in revenues is simply a bad joke and unacceptable....

      Before ya start chiding me as a " SHORT" STOP....I hold no position as of yet however I will be watching very closely in the coming days.........Not only is Amzn going down, the whole market is on the edge of a CRASH not just a "correction"....Good Luck...Any long will need it in the coming months.........Especially those on MARGIN WHICH THERE IS A BOATLOAD...

      • 1 Reply to lemmeknow23
      • Actually short interest is only 1.88% as of 10/15. Which means not many shorts needed to cover their shorts (I am sure most would have already covered this Friday). So if it starts a little bit of downturn from current level (very likely), shorts may not act as a buffer to prevent downfall (by covering).

        Your arguments are all valid. Just look at the authors/analysts and others who are writing "bullish" comments and inflated targets. They all owned it long. Easy from them to praise...Isn't it?

        Don't get me wrong. This is a great company for consumers but not for shareholders. Profit margin of a "penny"???? Even if you conquer 1/2 the world, how can you make enough money???

    • did you born after the clicks mania?
      big Rev with no profit can be disaster if sells will drop....

    • Economies of scale has not been reached with nearly $70Billion in revenues. 20%+ growth rate is going to be extremely hard to achieve with such large numbers. The law of large numbers catches up to them. The company already seems a bit desperate to achieve this growth. Absolutely no focus. Positive Cash Flow is a must. and to justify a $160 billion market cap, it has to be a lot of cash!

      Strange to see a company give poor guidance for their most important quarter and see the stock rise 10%. Company's top end is for a $500mm profit, lets double it and call it a billion. That is not impressive when you are valued at $160 Billion.

      Sentiment: Strong Sell

    • "see microsoft, dell and apple"

      How can you mention Microsoft, Dell without even complete knowledge about the company itself. You do realize by the Microsoft was making billions and had billions and billions in cash.

    • ... and when they do try for profit, it won't be a good deal anymore and revenue will plunge.

    • not that is matters right now, but one might take a counter stance to the long run investment in AMZN based on what you say: yes, $17 billion is not a small deal? but the question is : why has AMZN not been able to get "scale" to the bottom line as they increased sales to $70 billion +? 5 years ago, that was the story analysts were implying as sales increased. Sure ,some is spending initiatives, but many of those are capitalized, blance sheet items: cash to PPE, or cash to equipment) etc, and they still have negative real cash flow. Of course the consumer likes AMZN, they get more out of them then they have to pay for their services, in order for AMZN to show those $17 billion numbers. But's it's still,as an investor, not gonna be able to increase equity, that can used to pay you in the future. It's all in apprecation of the stock on a moving target: which is now qtrs upon qtrs of negative cash flow and earnings, while the stock goes parabolic. So an investor is relying on that condtion continuing. As an investor, you'd like to see them start to build up stockholder equity at some point. For a trader, it's different: they'll chase it until the stock doesn't work going up anymore: two different scenarios.

      • 1 Reply to im_too_hipp
      • I agree to the extent that the initiatives that they are currently involved in do not come to fruition. Yes, as an investor (which I am as I bought in at 128) I would like to see positive cash flow. However, we are also watching them diversify in to many different areas. This costs a great deal of money. My biggest concern is actually not the cash flow but the multitude of somewhat seemingly unrelated business ventures that they are getting in to. For example, why Tenmarks? If this is all dependent on the success of the Kindle then even more worrisome. However, I am betting on the fact that at least some of these (like the video/programming) become wildly successful and eventually generate revenue in their own right. I buy so many of my items from Amazon that I am taking the Peter Lynch view of the stock. However, in this environment where the big tend to get bigger I am buy into the story. I agree at some point they will have to stop dumping money in to data centers, distribution centers and video and it will need to be profitable. They are in all the right areas though and far be it from me to know when the market starts to valuate them in traditional terms. When it happens though, I believe that we will have plenty of warning and by then I would hope that they are profitable andor I expect that the stock will be higher than it is today.

    • Is that why the box is delayed to after the holidays, so they could at least meet the .09 loss?

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