So what makes you invest in AMZN? Is it Free cash flow? that is down for the past 5 years to almost nothing now. Is the strong balance sheet? Oh right, their current ratio is 0.86. Maybe its the massive growth ... ouch only a mid-teens grower now. Or maybe the pricing power? oh right, no margins. Maybe AWS ... well, AWS growth has been cut in half by the huge price cuts driven by comp from Google, Microsoft, etc... or maybe its because of the great Fire branded tablets and phones, which combined has less than 2% market share .. with no sign of profits or cash flow and a newly minted $5B in debt (plus the massive stock dilution from all of those options and RSU's) ..this stock is headed way, way down over the next few years.
Water always finds its level.
Stock is flat to pre-earnings, after a complete reset by AMZN mgt and the exit by the CFO. 2015 sales growth cut from 21% to 18%, and EPS cut by 52% (from 1.92 to 0.92), and an extra $2B in debt needed to support working capital shortfall. I knew the earnings drop wouldn't make a difference, but the big cut back in growth and lack of cash I thought would.
It really looks like this stock will only drop if they go into bankruptcy.
Except that ALL costs continue to rise as a % of revenue.
Shipping, Fulfillment, Marketing, G&A and Tech&Content. Not some, ALL up over past several years with revenue. That is why the stock is down 20% this year, as there has been no economies of scale even at $100B in revs. This has been the disappointment - it should have happened by now.
Dude - analyst 2015 earnings estimates were brought down by 25%, so the 26% was completely justified. The company is now trading at a higher multiple than it was pre-earnings (on lower growth projections). This will settle back down once the Cuban effect subsides in a day or two.
It didn't work out this time .. untypical Monday move after a strong option Friday move right to max pain. It works about 80% of the time .. not this time.
AMZN was an easy buy this morning, with the open interest at $300. Now in the afternoon, they are going for the kill pushing it over $300. This stock is a pure gamble and has nothing to do with fundamentals when it is clear from earnings call.
That's what make a market - you see opportunity, where I see a failed promise over many years. The question is, what are you willing to pay for the potential for future profits? You have to admit it is a risky bet. At $300, beyond perfection is already priced in.
Q4 cash flow should place current ratio just above 1 by end of Q4 from 0.89 today. But, the large neg cash cycle of Q1 (should be about $-3.5B) will overwhelm the $2B line of credit they have, and require them to line up more debt soon.
So, the banks that want the business are out marketing the stock with AMZN to raise demand for the debt - hence the big run.
And unlike the pumping where upgrades and price target increases are based on nothing but a higher stock price, this downgrade of credit by Moody's will actually impact financial performance by raising the cost of debt of Amazon and ultimately result in lower cash flow.
they are headed for another big fall .. back to shorting on Monday!
You just keep on misleading with bad data - it isn't going to help. AMZN trades at 140x TTM FCF. One of the highest in the S&P. And even FCF is misleading at $1B TTM, as more than $1B of FCF generated is from pushing out payments to suppliers which they have to pay back soon. Hence the $6B in new debt.
Boy - was I right on this or what ... happened less two weeks after my prediction. 4 tranche's of new senior unsecured debt to come.
Nice deflection - but I'll tell you if you actually do the math, it is impossible to get above 1.5% net margin. Their capex spending is all opex .. it is servers for AWS, software development for the website and content for prime. They can't cut R&D as it is all depreciation of the capex for AWS. Plus how many companies have you seen cut R&D and grow? Let's see them raise price ... they sell commodity products with huge elasticity. If you can find it on another website cheaper, you buy it there.
They own over 10% of company, and can't take a down year in AMZN .. pulling out all of the stops with analysts during retail season and preying on low volume days ... Group manipulation trade on AMZN in Q4 is easy way to catch up to index's for the year.
It is a momentum stock - program buys drive the tape for a few weeks, and then it flips based on the numbers. You have to be patient, because when it flips, it will move huge over several weeks. They are all the same: LNKD, Yelp, Twitter, gopro, nflx, etc... the move is always in one direction for a while, then flips. Don't fight the tape.
peny - I have followed the weekly options manipulation in this stock for a long time - and it is severe. about 80% of time the stock moves to max pain on Friday - almost always on the upside. In almost everyone of those large moves up on Friday, there is a reciprical volume dump the following Monday to unload the accumulated Fri position. Then new bets are made on Tues/Wed/Thurs for the next weekly expiration, and game starts again on where it will settle by Friday.
Point is - the movement has nothing to do with fundamentals .. every 3 months there is a shock to game called earnings releases where reality sets in and the stock gets punished for a couple of days, and then game starts again - usually to the upside.
footballkid - I have been tracking the weekly options on AMZN for a long time. There was too much action at $300 coming into today to not know there would be some type of manipulation. You'll see I'm on right on Monday, when it gives up today's gains. This is accurate nearly 80% of time on this stock. $300 is only a round number because it is a key option strike price this week.