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Amazon.com Inc. Message Board

  • toycruiser toycruiser Jan 16, 1998 10:46 AM Flag

    short this next Tuesday?

    Technical analysis shows that AMZN may run up to $62 3/4 by sometime next week.... So $62 may be a good time to short AMZN and anywhere between $60 ~ $60 3/4 seems like a reasonable shorting range for a conservative shorter(it there is such a thing...)

    JSlicker and others were way too early to short AMZN last week.

    Any other tech analysis?
    BTW, DO NOT rely too much on ta for your decision making...

    My formula: 80% Fundamental Analysis, which tells me to short.
    10% Technical Analysis, which tells me not to short at this time and price, and wait for a better price and graph...
    and 10% praying hard, God tells me to short this baby!(just kidding)

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    • As I have predicted last week(message #187), AMZN is over $60 and is approaching the $62 3/4 mark (point of all return...)

      The stochastics and the momentum of AMZN is being exhausted fast... Seems like now is a reasonable time to short. AMZN may touch $62 3/4 by this Friday, but there is a good chance for AMZN to plunge after that. If AMZN go north from here (it probably will not go beyond $62 3/4) short some more....and enjoy the downhill ride...(it will be like powderskiing down Greeley Bowl at Alta)......just a ta talk.

      • 1 Reply to toycruiser
      • I trade through three brokerage accounts and none will let me short AMZN. Even small orders like 200 shares. Two of them say that they have no inventory. One (Ameritrade) tells me that the stock is restricted and that it cannot be shorted. The options on this puppy are expensive due to the high volatility of the underlying, so I don't really want those either.

        How the hell do I short this thing?

    • As I have explained in the past, it is my view that fundamental analysis can not be performed here, you will have to see my
      past posts for that explanation. The point is that the analysis comes into play when the entity and the industry start reaching a
      point of maturity. Remember, Home depot grew at 40 % and greater rates for over 10 years. A p/e of 20 is substantiated when its
      growth rate is greater than 20. So one would have to project what the revenues and profits would be at maturity. I would guess that
      AMZN can hold at least 10 % of the market at maturity. If that is the case they can eventually have 9 billion in sales , not 1
      billion. I'm not saying this will happen any time soon. But, currently I am willing to hold this stock at these levels for a long
      time, assuming the remainder of the growth puzzle stays positive. If one sees that a price of 60 will generate a p/e of 30 when
      this company is near maturity and growing at less than 50 percent annually, I would certainly not hold it until then. Being this
      is a speculative issue I will hold it in my otherwise fundamentally defensive portfolio.

      A few other points. You question why I speculated on four issues. In infancy of a company , what else could you do. Secondly, the gross profit of AMZN is not 5 %, it is closer to 20 %. That will occur this year fiscal 97 and should continue fot the next few years. Tell me one other thing, do you consider KO and many of the other Blue Chips ( gips) tulips.


      Ron

    • Hey,

      Not to harsh at all. Give me some time to do some in depth research and i will reply back with my answer. BTW, Jim Rogers,
      who I follow closely and was surprised to see how similar are portfolios are this year, has been down on all these types of
      stocks for years, remeber he was short intel at 30. I believe what Jim does is balance his portfolios ( just as i do). If he is
      wrong on 20 % of his picks, he will do just fine. If I (and my clients for that matter) am wrong on this one and it goes to ZERO,
      we will do just fine.

      So, I'll respond, it might take a week. Also, thanks for the site, I will check it out. I too like these debates, questions like yours force me to look deeper. I dont expect to change my opinion, but, i would have no shame in doing so if my analysis and more of a hunch was wrong.

      Thanks,

      ron

    • I guess I was wrong. Silly to ever sell short AMZN. Books are the most valuable asset
      in the world and I personally will spare no expense until I have bought every book
      AMZN has for sale. Just keep buying the stock. As long as we keep buying the stock
      it will ALWAYS go up. Nothing on planet earth is better than AMZN. 300 dollars by
      yearend is a sure thing. 700$ by next year. Even that may be too conservative. Since
      noone will ever sell the stock (insiders will NEVER realize their profits) there will be no
      way this stock can ever come back down. Soon everyone will hear about this
      phenomenon and the stock will be in even more demand. AND NOONE WILL
      SELL! And soon everyone on the planet will be on the internet buying everybook they
      ever wanted only from AMZN. The stock is sure to go to 1000 $ or higher by 2001.
      This is early retirement time for all the longs ......hang on we are all gonna be
      RICH!...............;^)

    • Everyone on WALL STREET is going to be recommending this stock. Just close your
      eyes and BUY. You can NEVER lose. It's only 63 dollars a share. SO CHEAP. Only
      1.5 BILLION dollar market cap! Sales are going to be OVER 100 million for last
      year! Who cares about all the competition?! AMZN is now a superior brand name.
      Who cares if BKS sells books cheaper, and gives you a nice place to stroll around and
      get out of the house and enjoy the real world! REAL people BUY online and never
      leave the house! 15 times P/S ratio is a BARGAIN...No earnings for the next 2 years
      is IRRELEVANT as long as we keep buying and never sell!.....the float is only 3
      million shares and the small investor controls it all! I am sure the insiders and venture
      capitalists who funded AMZN will NEVER sell their 19 million shares to realize a
      profit. They will ride it to 1000$. And so will we! WE will all be RICH. It is so EASY.
      BUY AMZN and retire in 2 years...................;^)

    • Good points from both the long and short folks. Let's not forget, for you long-term investors out there, that Amazon.com is
      not limited to its current business of selling books. Branding is the key here... if Amazon can establish itself as a household
      name (as the Motley Fool is counting on with its 10 year outlook), it could be the gateway for consumers into all different types
      of goods and services. Indeed, without branding, Amazon is worth very little. Today's valuation is an optimistic view of the
      future, counting on the value of the Amazon name. It practically demands that Amazon will be selling more than just books.

      No successful big business grows to be successful with a narrow view of what they sell. Xerox would be lost today if it
      thought of itself as a "copier" company instead of a "document" company (with its computers, fax machines, etc.). Walt Disney World
      would be a fraction of its current success if it thought of itself as a theme park operator instead of a vacation resort
      destination (with hotels, golf, spas, cruise line, nightclubs, etc.). So it is with Amazon. And a very big diversified successful future
      is not as unlikely as some would think.

      As for short term investors, Amazon doesn't look so hot at its current valuation. The numbers look shaky and the company doesn't seem to have any new immediate, revolutionary ideas. I sold my shares yesterday and put the funds into something more stable and less risky because in my situation I have to be a short-term investor right now. But I'm keeping an eye on this company...

      Good luck to all!

    • First, I want to clarify an error I made that you pointed out:

      "Secondly, the gross profit of AMZN is not 5 %, it is closer to 20 %."

      Sorry, I shouldn't have written "gross". Mea culpa. I meant the profit margin (profits/revenue), and 5 % is extremely generous.

      I disagree with your point that fundamental analysis can not be performed now. But I'll leave that aside for the moment. What I asked you to do is perform fundamental analysis based on levels of revenue, profit margins, and P/E ratios you expect to see in the future. There are many more fundamentals to consider, but let's to stick to those three for the moment. When (and if) Amazon becomes a "mature" business, what do you forecast for these three fundamentals?

      And here's what I think:

      1. Revenue

      $9 billion in revenue, as you suggest, is simply insane. That's TWICE the revenue of B&N ($2.5 billion) and Borders ($2
      billion) combined. No chance Amazon will sell $9 billion in books. They would have to double revenues every year for ten years to
      reach that level. Most analysts, and Bezos himself, have said $1 billion in revenue is Amazon's long-term goal. (I can dig up some
      quotes, if necessary.) I think even $1 billion is generous with all the competition, but I'll concede $1 billion for the sake of
      argument.

      2. Profit Margins

      5 % tops. That is even extremely optimistic. To achieve that, Amazon must cut operating expenses relative to sales to
      ONE-THIRD of current levels. 5 % would be much better than B&N's 2.1% margin or Borders's 3.0 % margin. In general, all companies that
      depend on economies of scale (as Amazon does) have razor-thin profit margins. They make a profit by selling barely over cost ("deep
      discounts" sound familiar?), but with huge volume. Other examples: Wal-Mart at 2.9% and Costco at 2.7%. But again for the sake of
      argument, I'll give you 5 %.

      3. P/E ratios

      You said that a P/E of 20 is justifed for a *growing* company, but again I'm asking you what you think is fair for a mature Amazon. However, I'll be generous (again) and give you a P/E of 20.

      Conclusion:

      All the above assumptions are for a mature Amazon, and they are all generous. You end up with this: $1 billion (revenue) * 5
      % (profit margin) = $50 million. Multiple that times a P/E ratio of 20, and you have a market cap of $1 billion. Divide that
      among 23,859,00 share outstanding and you get about $42 a share. And that's all based on generous assumptions of where the company
      will be several years from now!!! What is wrong with my analysis? Revenue, profit margins, or P/E ratios? And to re-iterate what
      I said before, I'm not asking you to perform fundamental analysis on Amazon's current financials -- I'm asking you to perform
      fundamental analysis on speculative, future financials.

      Rimpinths

      P.S. I hope I don't come across as too harsh. I love a good debate, and not too many longs are willing to stand up for this stock. I appreciate your courage! And I don't think KO is a tulip. Maybe a little overvalued, but not a tulip. You want a tulip? Look at the financials of our sponsor -- YHOO. Also check out Roger's 1998 Short Picks at:

      target=new >http://www.techstocks.com/~wsapi/investor/Subject-18700


      However, I don't think you'll like the fact that AMZN is on his list.

    • Come on everyone! It just downticked 1/8!!! Where was your bid?! 1000 dollars in 2
      years is a SURE THING....Forget about normal valuations! This is different! This is
      AMZN. Everyone will buy the stock and Wall Street will ALWAYS recommend it. If
      you just buy and hold there will never be any stock to sell! The insiders will NEVER
      sell their 19 million shares! We control the market with our 3 million share float! We
      will drive it to 1000$ or more! Call your friends, mortgage the house , break out the
      kids college fund! This is a SURE THING!!!................;^)

    • rbco, please dont take this personally but, you are a moron! Don't you understand sarcasm when you see it?.....my point is
      clear to those who do. Valuation, based on P/S and earnings is ridiculous and the small float is the only thing keeping this up.
      The real float will increase by 19 million shares this year as the insiders sell out. They do this 2 ways. By straight share
      selling (probably coming after the earnings release) and by selling NAKED IN THE MONEY CALLS....ie. selling Feb 45 calls, take in
      the premium and then get the stock called away from them at expiry. You will notice how at each expiration the 'float' will
      increase...................anything else I can teach you?

    • Seems to me that you cannot recognize irony when you see it. Being long AMZN here might cloud anyone's vision.

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AMZN
312.99-11.81(-3.66%)Jul 31 4:00 PMEDT

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