Amazon In Six Simple Charts

Tyler Durden's picture

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:



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bnbdnb's picture

Stop run. Just G.T.F.O.

ihedgemyhedges's picture

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......

0b1knob's picture

Amazon business model:

1.)  Sell below cost.

2.) ??????????????

3.) Profit!!!!!

Say What Again's picture

Seriously though -- What explanation for the 18% gain are the "experts" giving?

FEDbuster's picture

Maybe because you now have to buy $35 worth of stuff to get free shipping?  Bullish!

Herd Redirection Committee's picture

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.

MiguelitoRaton's picture

Business Model:

1. Sell below cost

2. Massive volume

3. Miracle happens

4. Profit!!!

...fixed it for you.

spine001's picture

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?

El Tuco's picture

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.

Cruel Aid's picture

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

Ying-Yang's picture

Amazon is growing and spending for the future.

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!


Patriot Eke's picture

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!

FEDbuster's picture

"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. 

Groundhog Day's picture

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.

redpill's picture

I hate shopping or even being in a store, so I still order most everything online.

Joeman34's picture

Agreed, but it still doesn't justify the rediculous valuation the market is attributing to AMZN.  This dog will crack eventually just like TSLA.

willwork4food's picture

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.


Oleander's picture

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.


ptoemmes's picture

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?

orez65's picture

"... Why would I or anyone but at AMZN"


Oleander's picture

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.

FuzzyDunlop21's picture

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!

disabledvet's picture

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.

Freddie's picture

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.

failure to perform's picture

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.



RKDS's picture

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.

max2205's picture

It's 1999 all over again. ..360 ah....fuck

kaiserhoff's picture

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.

maskone909's picture

try and short it and get squeezed.  sucks.

Racer's picture

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......

Tenshin Headache's picture

The only way to win is not to play.

Joeman34's picture

Timing is everything.  You're right until the mass delusional realize what we on this board already know...

wingmann's picture

Just to let you know,I think you put the last chart in upside down.

Racer's picture

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

Platinum's picture

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.

Catflappo's picture

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.

Catflappo's picture

Good god, is it obligatory to have to write "sarc on"??   I'd hate to have written something any more subtle....

SpeakerFTD's picture

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.

Clowns on Acid's picture

No you don't. In fact using % growth makes the stronger point. Think about it... or not.

pragmatic hobo's picture

big banks are trying to make their year end bonus ...

maskone909's picture

increase in number of employees correlated with decrease in profitability?  no problemo, easy fix!  send her overseas and pimp that slave laybor.

KCCO's picture

Why bother sending overseas?  I am sure SIRI could man the phones.

comrade rally monkey's picture

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

monopoly's picture

Remember NFLX just this past Tuesday. 300 to 400 to 320. Hmmmm.