Jeff Bezos is Fortune’s 2012 Business Person of the Year. WTF?

ilene's picture

Jeff Bezos is Fortune’s 2012 Business Person of the Year. WTF?

Courtesy of Paul Price

Years from now people may be voicing surprise. Were the editors at Fortune looking only at stock price performance? If so, they got it right. As of December 11, 2012 Amazon (AMZN) shares were up 86.4% since year-end 2009.

Profitability peaked in 2010. Net dropped by 45.8% year-over-year in 2011. Consensus views for the year wrapping up (pun intended) this month indicate somewhere around break-even results. Share price performance has become totally detached from business results over the past couple of years.



Shoppers love Amazon’s large selection and exceptional service. On-line buyers love the chance at free two-day shipping. Many customers are still able to buy without paying state and local sales tax, an AMZN feature that is now disappearing in many areas.

Compare Amazon’s long-term corporate performance on any metric except sales growth and Bezos would not appear to merit Fortune’s accolade. Gross revenues have skyrocketed since 2002. Profit margins are substandard, however, when compared with brick and mortar competitors Wal-Mart (WMT), Kohl’s (KSS) and Target (TGT).

Amazon’s record over the most recent 10 years has come full circle. It's gone from losses to decent profits and now back to record high revenues, but without maintaining a positive bottom line. Free shipping and price-matching have eroded Amazon’s ability to actually make money.


Other big discount retailers have managed to far exceed Amazon’s margins while operating in the same challenging marketplace. WMT, KSS and TGT posted their results despite being subject to physical store overhead and the ‘show rooming’ effects that have crimped Best Buy’s (BBY) business prospects.



The real enigma is in the stock’s movement. A cult-like following and high short interest has research analysts in a bind. They don’t want to show SELL ratings on ‘hot’ shares, even when they can find no fundamental justification for appreciation. Short squeezes occasionally send the stock up quickly, deservedly or not.

Standard and Poors carried a 3-Star (out of 5) HOLD rating on December 7, 12, with the shares at $253.27. In that same report they calculated ‘fair value’ as $144.60, 42.9% below the publication date price. Their 12-month price target? $250. Why was this stock not a SELL?



Morningstar didn’t give a 1-year price target.  They did assign AMZN a 3-star HOLD ranking. They called fair value at $250. I much prefer to hold shares that appear undervalued in relation to their present day quotes. [What is Paul holding? Click here]


Well-respected research outfit Trefis is a bit less sanguine on Amazon’s true worth. Trefis carried a sum-of-the-parts ‘value’ price of $218 on Wednesday with the stock trading at $251.



Amazon pays no dividend. It is operating this year without net earnings. AMZN sells for almost 16 times book value. Currently profitable WMT, KSS and TGT are offered for modest P/Es while rewarding shareholders with 2.28% - 2.94% current yields.

Rational thinkers would not have anointed Jeff Bezos as Business Person of 2012. They would likely be sellers of AMZN at today’s price.

Don’t be blinded simply by fast growing revenues. Any business can grow their top line quickly when they are willing to move the merchandise at cost.


Dr. Paul Price has been contributing to Market Shadows. His Virtual Value Portfolio can be followed in the newsletter - click here for this week's, Table's Can Turn.

Paul specializes in value investing. He has been a featured speaker recently at the Options and Forex Expo in LasVegas and the International Traders’ Expo in New York City. Paul is now a featured columnist every business day on TheStreet’s Real Money Pro web site.

Disclosure: No position

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azusgm's picture

If Barack Obama can win the Nobel Peace Prize, Jeff Bezos can win Fortune's Businessperson of the Year.

willwork4food's picture

I'll give you this one Ilene. Years ago when I was an Amway distributor, the common theme in the upline was laughing at Jeff for not pulling a profit, but we made $2.00. (TWO USD)

Kudos to Jeff and the people who had vision to make it work. This is what keeps America and the free market great. I have for years bought many things from Amazon.


Go Tribe's picture

Fuck bezos. He wiped out independent bookstores and a lot of other local stores.  I like my neighbors and support their business efforts. I won't shop online.

willwork4food's picture

Really? why all the downvotes on this?  Seeing as I missed the upward trend in stocks during the dot-com bubble and fell for y2k (yes, I will fucking admit it publicly here), maybe I am missing something.

By the way, can anybody help me with a few bucks for food?

Matt's picture

"Why all the downvotes on this?"

Woah buddy, calm down and turn down the sensitivity a notch, you have precisely ONE downvote as of this moment.

matsoR's picture

Well, the guy is pretty smart when his stockholders were demanding immediate results back then (2000 etc.) he kept his long-term vision and achieved his goals. Gotta hand him that. He also has some very smart insights on startups in general and he even talks about the idea behind their amazon web services here which is pretty cool.

tnquake's picture

If you work at Amazon, how can you afford to buy their crap? $12.50/hour... oh boy!


Matt's picture

That's like one paperback per hour, including shipping and sales tax.

Shizzmoney's picture

Amazon has a taxmageddon coming for stashing cash in Luxembourg via the IRS, and just forfeited to MA in having their products be subject to MA Sales taxes:

Granted, the Kindle Fire was a good (stolen) idea, the website is sleak, and the inventory is plentiful......but if consumers have no cash to spend, while you are paying more in tax overhead, you're going to have to drop prices pretty low to move that inventory....which won't be good for profit margins.

ghostfaceinvestah's picture

The sales tax issue is going to hurt them bad.  I know a lot of people who shopped AMZN for the sales tax dodge (in CA).  Now that the gig is up, I expect their numbers will start hurting.

devo's picture

I live in CA and stopped buying.

Amazon jumped the shark a few years ago when they started using LLC distribution companies and joe sickpack to sell products on their site. Prices and customer service are still good, but margin compression will destroy the stock.

devo's picture

By deduction, this would imply he's the only businessman

Yes We Can. But Lets Not.'s picture

Surprised Walmart's margins are unchanged.  I know my way around a Walmart store, and I know that have been upping prices throughout 2012

Chris88's picture

AMZN P/E (NTM) = 143, P/B = 15.10, TTM ROE = 0.52%, profit margin = 0.28%.  How does a company returning less than 1% on equity deserve a 1,500% premium to book?  Is the market pricing in BVPS build over a 400 year cycle?  143x forward earnings, they're barely even squeaking out a profit, and the market is pricing in that type of earnings growth?  Absolutely ridiculous valuations on a company whose stock is so beloved even though they're barely profitable.

quadcap's picture

What all y'all stock pickers don't understand is that Bezos could care less about the stock valuation -- it's all about growing fast.   Cash flow is used to fund new, risky, ventures, and the genius of Jeff is in picking winners here: AWS, Kindle -- huge bets that look to be succeeding (again, in terms of sales growth) in driving the Amazon flywheel.

(Look at the napkin diagram here: -- do you see any reference to the stock price?)

The sales tax thing, which everybody thinks will kill Amazon, will actually enable them to become completely dominant, with a huge barrier to entry in place.  I'll let you figure out what that barrier is.


Matt's picture

Every quarter cannot be massive Cap Ex spending. At some point, you have to take a break and consolidate, make some money. You cannot be a startup forever.

kaiserhoff's picture

Now that's what we get from crunching numbers...

On the other hand, if you look ahead to a time when it's illegal to buy a book from anyone other than amazon...

Simit Patel's picture

the genius of amazon will be understood in time. what this article does not appreciate is that amazon is investing significantly in a number of high margin businesses -- and the revenue growth we see today suggests strongly the company will succeed in these high margin ventures. go to and check out hte first five links on the left side. all digital goods. which is another way of saying all high margin goods. growing sectors too.

and of course there is amazon web services, which now delivers a significant portion of the web. we are talking about a 90%+ margin business here. 

the market cap that apple now possesses is on its way towards google and amazon. google's market cap is still twice that of amzn; i can see amzn catching up over the next few years when profits from their digital businesses are realized and reported. and that's not factoring in the inflation bernanke has in store to juice all equities, especially those likely to attract capital from big banks/funds.  


Squid Vicious's picture

LOL there are no "high" margins to be had selling anything on the interweb by definition... there are zero barriers to entry... as far as web services not sure about your 90% figure but they have been drastically slashing their prices in recent months to compete with Google and others.... this is also a no-value-added business which means very slim best... good luck with your investment

ghostfaceinvestah's picture

Not to mention there is no barrier for a consumer to compare prices, there is near-perfect price transparency.  AMZN has rode the sales tax dodge for a long time, but that is coming to an end fast.  The balloon is about to pop on their stock price.

NidStyles's picture

I do think Amazon has a very good business model. If the economy wasn't such a fraud they would be worth investing in.

DavosSherman's picture


ilene is going for another 71 votes with a rating of 1.6 again.  She is the pro at crash & burn with shit articles.

Essential Nexus's picture

Amazon is going to have a near monopoly on the US consumer soon.  Whether or not they will be able to afford anything is iffy.  But it seems like the "market" believes the Ponzi will survive a little longer.

Shizzmoney's picture

Amazon is going to have a near monopoly on the US consumer soon.

The government referees the monpoly, not the consumer here. And they gave the belt to Google a long time ago. 

Since acquiring Barnes and Noble, Amazon is most likely the second most recognizable name on the internet for retail.  But it isn't Google (who are already expanding their retail servic with Google Play, Google Store, quiries on web searches, etc.).

orangedrinkandchips's picture





1999 and then some....


I do like amazon as a company but obviously the IPO money- long long gone by now- and now the churn from buying and selling it's own stock helps keep the business afloat. 

no margins. volume but is it a non-profit company?



Omen IV's picture


AMAZON owns a number of product categories - has put in place a hassle free system which consumers have confidence in and keeps taking out other brands with overwhelming market share -

revenues growth  sequentially is the key - profits dont matter -  cash flow matters when you are sustaining ever increasing market share and capital investment  without huge dilution - if he can do it and he is not selling out - he is "building" he doesnt care about shareholders he cares about the business strategy -  once he pulls the plug on low ball pricing it will cascade permanently to the bottom line  - this is all Bezos timing decision not the consumer - not time to harvest yet that is all that is going on

one can argue he has a more entrenched perch than Apple which must rely on new technology to stay up and relevant

ghostfaceinvestah's picture

Once he pulls the plug on low ball pricing his business is dead.

adr's picture

I enjoy buying counterfeit and stolen products on Amazon while supporting the Russian and Albanian mafias.

Oh wait, I don't support that ad that is why I don't buy from Amazon and nobody else should either.

If I try to sell counterfeit prducts, the FBI will arrest me and hit me with hundreds of thousands in fines. Bezos can sell stolen product all day long through Amazon Marketplace and he gets to take home millions.

Wow, that's fair.

Bezos has one of the first places in line for my guillotine.

kaiserhoff's picture

Sheeeeeeeiiiit.  I'd settle for a little UBS/Bank of America style drug money laundering facility.

Gotta pay half a percent of my spiff in fines?  Damn you gubbermint man.  As Hughy Long said, an honest politician is one who stays bought. 

Anyone else remember rule of law?   Not doubting you for a second adr.  We have a lot of work to do.

Squid Vicious's picture

they can never "pull the plug" on low ball pricing... it's the internet... duh!

otto skorzeny's picture

I enjoy the shopping experience at AMZN also- no hassle returns, good prices, big selection and the best part is you don't pay sales tax to the assholes at the State of IL Dept of Revenooers

Squid Vicious's picture

s.b. renamed Business Con-Man of the Year

larz's picture

Big deal I am the unemployed homeless guy of the year

kaiserhoff's picture

Nice one, Ilene.  Everyone in the book business hates and fears Bezos, but you won't hear it in public.

He's driven out the last of the independents and the only true diversity by selling a dollar's worth of merchandise for 90 cents.  Brilliant.

e.blair's picture

I knew a bookseller who knew books better than ZH knows the markets.  And he used Abebooks.  But I just learned that Bezos bought Abebooks recently.  Aren't there any monopoly laws that can be used against this guy?  He's a creep.

e_goldstein's picture

"Years from now..."

Don't see that happening. You can't reward stupidity and graft the way we do without destroying the complex systems underlying the civilization. We'll be lucky if years from now we aren't slaves to cockroaches... or worse, Blankfeins.

DavosSherman's picture


It isn't the strongest of the species that survive, it is the ones who sense change first.

The guy is a fucking moron.

LouisDega's picture

Bezos is a good man. He got my Christmas shit delivered with no hassles. Thanks Mr. Bezos, You are a gentleman and a scholar

Town Crier's picture

Green arrow to you, sir.  I like Bezos and Amazon.  I own one of the first Kindles and still love it.  For me Amazon always does what they are supposed to do, on time and done right.

e.blair's picture

Kindles are to books what masturbation is to sex.  The kindle will not last. And only a fool would build a library of digitial books not realizing that all formats get changed eventually.  Surely you realize that eventually, especially if Amazon falls on hard times, they will make the Kindle you own less and less easy to use so that your library loses its value and you have to replace it with with digital books in some other format.  You don't really think Bezos is going to allow you to use that format forever do you?  Do you?

SAT 800's picture

LOL. I like the quote. Well, it's time for me to go read my book now. My real book made out of real paper and ink. Cheers, everyone.

willwork4food's picture

Viewing some of the hefty over-weight whales out there these days, I tend to thing a JPG is the wave of the future.

mrktwtch2's picture

i think bernake should

DavosSherman's picture

"Paul specializes in value investing." 

Bullshit.  Value investing today means gold and silver.

Another tripod dog piece, nice job, again, Champ.

Longing for the old America's picture

Yup, Azhole, buying Gold near all-time highs is a great way to make money.

DavosSherman's picture

Longing for the... you fucking moron, Dalio and Gross didn't join the market [2 months ago] at the all time high.  Sprott isn't hanging onto his gold because it is at the all time high.

You couldn't find the all time high with a bag of weed and a bong in Seattle.

There are 4 types of investors: Wise, Wicked, Simple and the Too Stupid to Ask Qusetions, AKA Dumb Money.  That's you.  Dumb money.  To fucking stupid to even know what money is or isn't.

NidStyles's picture

I like your style, but Amazon does have a very good business model.