This page has been archived and commenting is disabled.
Amazon In Six Simple Charts
In the new normal, the following six charts which simply track the transformation of a company from a viable, if slower growing, cash flow generation model to the godfather of the dot com 2.0 movement...
... Are enough to generate the following stock reaction:
»
- 38607 reads
- Printer-friendly version
- Send to friend
- advertisements -
Stop run. Just G.T.F.O.
Amazon's model hasn't changed since 1999: Lose money on every sale and make up for it on volume.
Still works today since we are back in 1999......
Amazon business model:
1.) Sell below cost.
2.) ??????????????
3.) Profit!!!!!
Seriously though -- What explanation for the 18% gain are the "experts" giving?
Maybe because you now have to buy $35 worth of stuff to get free shipping? Bullish!
Its called blowing stops out of the water. Thats it, nothing more.
Some poor SOBs went short, on leverage, set a stop for 12% above the previous close, and BAM!!! Raped.
Business Model:
1. Sell below cost
2. Massive volume
3. Miracle happens
4. Profit!!!
...fixed it for you.
Stupid article, valuation comes from the present value of future cash flows and Amazon by making key investments is steadily oncreasing the probability and size of those flows, thus its valuation goes up. Standard, non internet commerce should be crashing, since if Amqzon grows as its numbers forecast, qlmost everything else will die. The question for you is where do you buy your staff? I have been for years buying from the internet and every yeqr amazon is closer to offering the brest price and service, and its doing it with a 1% margin. Who is going to be able to competenwith them?
Walmart, Target, and a handful of other retailers could crush AMZN in a heartbeat. They may have to collude but it would be the end of AMZN just like that. I hope they don't since I am a customer and they have made some of my purchases very convenient.
I've made a few decent sized purchases in the last few months and I get the amazon price by flashing the price at amazon.
I don't know how amazon is even viable with this policy locally.
I see a humongous short in the near future
Amazon is growing and spending for the future.
http://www.businessweek.com/articles/2013-08-29/why-amazon-is-on-a-wareh...
When Amazon offers same day deliveries and refunds you will see how much market share they take from other retailers.
If others wish to compete they will have to spend to build out like Amazon. Watch what happens over 5 years!
I used to take full advantage of the free shipping at $25 or more bought. With it raised to $35 and taxes added, it's definitely frustratiing. However, Amazon still has a lot going for them because ordering through them means I do not have to deal with the people of Walmart / Target!
"The People of Walmart" are half the fun. Why just look at pictures on a website, when you can see the live show? It is like the Trailer Park Boys go shopping. Lots of action on the 1st of each month when the EBT cards get refilled. Tell me you wouldn't have wanted to be at the "unlimited" EBT looting fests a couple weeks ago just to watch the mayhem.
I wonder if AMZN sells tulips?
I used to buy things from them because it used to be relatively cheaper, i got free delivery on items over 25.00, and i didn't have to pay the 7% sales tax. Now, I have to pay the 7% and most all retailers will price match if you whip out your phone and show them a cheaper price. Why would I or anyone but at AMZN.
I hate shopping or even being in a store, so I still order most everything online.
Agreed, but it still doesn't justify the rediculous valuation the market is attributing to AMZN. This dog will crack eventually just like TSLA.
TSLA +5.26%
How can anyone hate shopping or going to the store? I just* love* giving the checkout girl my brand new 24.99%apr Visa with the upgraded debt limit for $14.95. It gives a new meaning to my looking forward to our invevitable financial meltdown.
Milkman, Peapod, and Amazon. (Amazon Prime). I do very little in store shopping. Its worth it for me as I just hate shopping.
I refuse to shop at Walmart, if you need to shop in your pajamas then shop online.
Agree, but maybe like the old Sears Catalog last century...where many people simply did not have any other alternative like many of us do.
Anyone remember Western Auto stores?
"... Why would I or anyone but at AMZN"
eBooks
Have you seen the new Kindle Fire HXD? It has the rear faceing camera the kids want. Our 2 youngest have Kindles but we were considering Galaxy upgrades. Now we may get them the new Kindles instead. We all download books from Amazon to our Galaxies.
These new Kindles will be competeing with Samsung buyers entering the tablet market.
Eventually someone will point out to all the AMZN shareholders that if you lose a little money on every transactrion, you dont make up for it by having a lot of transactions. That just means now you are losing a little money on a lot of transactrions!
But for some reason in their head
(Negative profit per sale) x ( Many sales) + ?????????? = PROFIT!!!1!
this is why short sellers have been slaughtered in this stock. those sales growth numbers are simply staggering. they also have a contract with the CIA to provide data security as well (so far at least. IBM is protesting.) i do agree they can't go on like this forever but when sales increase at this rate free cash flow from operations can become monumental. next up "project blue oyster" or whatever Mr. Bezos calls his space venture.
I have mentioned before that many of these popular stocks are based on the business model of FOO or Friend of Obama.
As long as they donate, suck up and do their duty - their stocks get ramped up with Fed and HFT/algo money.
My company sells on Amazon. It's a nightmare. We are doing this for exposure. Currently they are stocking alot (about 25%) of our merchandise that they purchased at wholesale, and when it sells we give them a 9% commission!! After I learned of this, I'm a little more apprehensive to shop there. Believe me, I have had my very active account for over 12 years. Oh and when you ship out the merchandise to them, everything must be in different boxes by color and style, labels must be affixed in one particular position and on and on.
It's no better running a small storefront there either. I've been selling toys (to raise funding for another venture) and Amazon was one of the venues I used in between shows. Once you really work out the numbers, it's ridiculous.
In the under $20 range, where most of the market lives, Amazon's commission is nearly 25%. There's the flat fee, then the percentage commission, then a cut of the shipping too. Without a subscription fee, you can't set shipping options, so you get the same $5 (minus fees) to ship next door or cross country. So to compensate you have to bump prices up which makes you non-competitive to both your local customers and cross country competitors (unless they've also adjusted their prices). FBA (fulfillment by amazon) is pitched as a cure, but they replace one fixed fee with another, require you to ship to them (no local drop off), charge you monthly rent, _and_ open you up to A2Z chargebacks when their total lack of packing material dings the hell out of your stuff. And that's all before they lock you out of sales over the Christmas shopping season for not meeting some arbitrary metrics! Well, gee, if you let me set my own shipping rules and stopped jacking my prices up 33%, maybe I'd have a shot at hitting those metrics you want so badly...
The only way it (Amazon) worked for me in the beginning was that I was selling off some old high-dollar collectibles from my own collection. I don't think I could make it selling new high-dollar collectibles with regular margins. Even eBay is more reasonable and their fees have been getting up there too.
Suffice it to say, my storefront has been in wind down mode for the last several months. I don't even care about being shut out of Christmas sales this year.
And the stories I've heard from people in the publishing industry...ouch.
It's 1999 all over again. ..360 ah....fuck
Well done, Tylers.
I've tried to make sense of Bezo's business model for years. It seems simple. Amazon should be all things to all people. You have to admire the chutzpa, but the cost is a lack of focus on all things sane. Growth for growths sake. Internet bubble indeed.
try and short it and get squeezed. sucks.
That's the only reason it goes up... they have to 'force' buyers to buy and who is a better forced buyer than a shorter on a margin call......
The only way to win is not to play.
Timing is everything. You're right until the mass delusional realize what we on this board already know...
Just to let you know,I think you put the last chart in upside down.
Secret in this 'market' as with dotcom is to buy shares in a company making the most losses and you will gain the most increase in share price as a result... because it is all about 'future' 'earnings' and hopium is a powerful drug
I must admit, I will miss Amazon when everything crashes. I'm stocking up on stuff I can't get locally ahead of time.
I juice the Prime shipping.
This is so unfair on Amazon - they have only been around for 20 years. Check back in 2060 and you might see some semblance of profitability.
Until then, give them a break. Bezos knows exactly what he's doing and has a brilliant handle on the costs of execution.
U madd Bro?
Obvious sarc... relax.
Good god, is it obligatory to have to write "sarc on"?? I'd hate to have written something any more subtle....
Pretty remarkable chart set, except that first one. You can't compare Y/Y% growth and # of employees. It's bogus and misleading. You either need nominal for both or Y/Y% for both.
No you don't. In fact using % growth makes the stronger point. Think about it... or not.
big banks are trying to make their year end bonus ...
increase in number of employees correlated with decrease in profitability? no problemo, easy fix! send her overseas and pimp that slave laybor.
Why bother sending overseas? I am sure SIRI could man the phones.
whenever I get to optimistic I recall back to the days in 2001 when I bought 50,000 shares of Amazon $7.00.that puts reality back in a check in sincerely depresses me
Did you sell them at $7.125?
7.15
Remember NFLX just this past Tuesday. 300 to 400 to 320. Hmmmm.
If there's a round 2, I'll be ready this time.
What gets me is its up 20% from oct 9th low and they guided lower for next quarter. Revenue beat was all of 3% truly AMAZING.
WSJ: Gotta luv it.
Amazon Reports Another Loss
The online retailer reported its third loss in the past year after a more than nine-year run of profitable quarters
Stock up 10%. Shades of 99, oh yes.
The time to short Amazon is when they build data centers or distribution centers on the Amazon.
Funniest stock ever.
Bla bla bla, same old same old every quarter. Let me know when those charts actually help you make money. Till then there's only one that matters.
I believe Amazon is really a public utility. They keep prices low for all of us. We should applaud their existence, whether they are profitable or not.
When Miller / Modigiani published "Dividends Don't Matter" in the late 80's, and by mid Nineties the dotcom boom was underway with of course all the tech start ups gone IPO not even considering dividends.
So.. knowing M/M's argument regarding dividends could they possibly revisit their theory... now with Fed Gov't debt at $1T / ye and an overall debt of $17T and rising, as well as the incendiary printing of BendOver Benake, and do a study on why Earnings don't matter ?
Can AMZN stock price stay irrational longer than AMZN can stay solvent?
THis is good news for the stock..........right?
Retail thinks it is overvalued, so Wall Street pumps it.
http://www.youtube.com/watch?v=fP0MXJAQhmo
I've been telling my wife to sell it since $220 last November. She thinks I'm an idiot. I tried to convince her to sell the calls at $300 when I thought it peaked at $280. She won't even put a trail stop in. "Baby, they don't make any money" "I don't care. It's done really well for me." Can I go back and take the other pill now?
I've been noticing some changes in their free shipping rules recently. The few people that I've met who worked in IT at Amazon all said the same thing about how crappy it is there. One friend just got hired on to Staples... one of the upper managers told him at the job fair that Staples is going to start selling everything online. They're going to compete head-to-head with Amazon. This could get interesting...
Staples competing on-line head-to-head with Amazon?
Good luck with that, Staples!
I certainly would not try it!
The algo's read the charts from right to left?
Amazon's strategy is very unique, but I believe they know what they are doing. This article does a good job of explaining why Amazon is actually more profitable than GAAP reporting leads one to believe: http://seekingalpha.com/article/1743332-amazon-much-more-profitable-than-perceived-and-a-foolhardy-short
I'm sure if you ignore GAAP and just focused on adjusted EBITDA, they look great. But depreciation is a real thing. And those warehouse and data centers depreciate quickly. Nothing like owning a giant empty warehouse in central PA as you run a cash kiting scheme.
Why not just focus on the R&D spend?
AMZN is set to make something like $800 million from advertising ON ITS OWN SITE this year.
and next year they start with the international ad revenue...
I was lucky enough to get a sneak-peek at Taylor's brokerage account
Guy actually owns 10 shares of AMZN!
Well maybe Amazon is bad but that twitter thing.. well now there is a great company, they lose even more money.. Im all in.
Whoa, WHOA, WHOA!!!
To get a complete picture, you need to look at gross revenues over the same time period, and whether they are spending or investing that money. Why make a profit on revenue only to be forced at gunpoint to give 40+% of it to the government? After all, it's common knowledge that Amazon goes to extraordinary lengths to avoid paying taxes, so maybe they are investing revenue in projects instead of showing a profit.
Revenues and revenue growth, according to the below looks VERY healthy - increasing at an increasing rate:
http://en.wikipedia.org/wiki/Amazon.com
http://michaeljparks.com/wp-content/uploads/2012/12/AMZN-revenue-w-2012-consensus.jpg
So, is AMZN spending the money on stupid things that won't payoff, or are they investing in things that will payoff?
They are building 3 buildings in downtown Seattle & 1 in Vancouver; that takes money. They are investing in cloud servers-where anyone can purchase space/time on servers-and Kindle; that takes money.
After all, spending $10M to develop a technology actually takes only $6M off the bottom line, right? I'm not saying that's what they're doing, I'm saying this article does not appear to consider that possibility.
At the end of the day, everyone must do their own analysis after examining primary sources.
You are really on to it. I believe they are going for total global domination wal mart syle.
Reinvestment is always a fantastic idea over paying to keep operating capital in the bank. My small business has purcahsed many end of year things instead of putting it in my pocket and paying out almost 40% of it to .gov. It is sometimes sad spending money to replace things that are still good, but better than paying taxes I reckon.
They've actually built the system of small business to require debt to be taken on and purchases to made. There is no way around it.
I agree-the premiere internet shopping mall.
Darteaus' comment needs to be bumped to the top.
I fucked an Amazon once ;]
What ws his name?
If you look at the revenue, price to sales, or retained earnings however, the story is entirely different.
Funny how everyone is focusing on the online shopping aspect. Not a single mention of their cloud computing platform which leaves Microsofts Azure in the dust.
I spend roughly ten grand a month on Amazon EC2 services. They have never let me down, never left me hanging and have served me very, very well.
Amazon is more than buying bullshit online.