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Amazon Surges After Hours On After-Tax Accounting Gimmick, Cash Burn, Collapsing Margins, And Negative Guidance

Tyler Durden's picture





 

 

Either the algos are getting really stupid, or nobody cares at all about the quality of earnings any more. Case in point - Amazon, which was expected to post revenues and EPS of $12.9 billion and $0.07 came up with a revenue of $13.18 billion, hardly breathtaking if this came entirely at the expense of margins as has been the case in the past year, yet the one item that is sending the stock surging after hours on yet another short covering squeeze in which people cover first and ask questions later, was the EPS which came at $0.28. Amazing. Only problem is that the EPS, which was $130 million equivalent, was based on $41 million in actual net income from continuing operations, or $0.09. Hardly the stuff sending stocks up 10% in after hours. What accounting for the balance? An after tax adjustment amounting to $89 million coming from Equity-method investment activity, or the oldest accounting trick in the book, which alone added $0.19 cents to the EPS number, or about 95% of the entire EPS beat. What is surely not driving the AH spurt is that company's guidance for Q2: "Net sales are expected to be between $11.9 billion and $13.3 billion, or to grow between 20% and 34% compared with second quarter 2011. Operating income (loss) is expected to be between $(260) million and $40 million, or between 229% decline and 80% decline compared with second quarter 2011." So... actual profit before after tax accounting gimmicks may be negative, but at least they will make up for it in volume, right? Or inverse cash: in Q1 the company burned $3 billion in cash, bringing its cash load down from $5.3 billion to $2.3 billion. One final thing that is not causing the10% spike after hours is the operating margin: the company made $192 million in income from operations on $13.2 billion in revenue, or 1.5% profit margin, compared to what was considered abysmal 3.2% last year.

The only chart that matters: Amazon operating margin. Speaks volumes.

Don't believe us? Check for yourselves.

 


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Thu, 04/26/2012 - 16:58 | Link to Comment Lost Wages
Lost Wages's picture

Amazin' Amazon. And this is the company about to put Barnes & Noble out of business. (And Barnes & Noble is the company that put every other bookstore out of business.) I think the eventual goal of the elite is NO BOOKSTORES.

Thu, 04/26/2012 - 17:11 | Link to Comment LetThemEatRand
LetThemEatRand's picture

More like one bookstore which they own and control, or more likely a few that pretend to be different but that are really all co-owned by the same players.  They do like to give us the illusion of choice.

Thu, 04/26/2012 - 17:24 | Link to Comment Mark Carney
Mark Carney's picture

It's all because of "The Big Short" I bought from then last month.

 

Your Welcome AMZin!

Thu, 04/26/2012 - 17:28 | Link to Comment AcidRastaHead
AcidRastaHead's picture

There will only be one book, but it'll come in many colours!

Thu, 04/26/2012 - 18:22 | Link to Comment UP Forester
UP Forester's picture

Nope.  Just beige.

And you'll like it.

Fri, 04/27/2012 - 05:24 | Link to Comment NuYawkFrankie
NuYawkFrankie's picture

That's right - beige.

And its title will be Form 1040

Thu, 04/26/2012 - 17:21 | Link to Comment Nobody special
Nobody special's picture

Hmm... 1.5% "profit" they say. So in other words, they lost big time when adjusted for inflation.

Sun, 06/17/2012 - 12:21 | Link to Comment Mensagens Para Orkut
Mensagens Para Orkut's picture

I had to apprehend through the address alert because i anticipation i HAD to be missing something back it was up big time AH. Glad to get anatomy that my account apperception abilities are still in place.

Mensagens Para Orkut | Mensagens Para Celular

Thu, 04/26/2012 - 16:59 | Link to Comment Squid Vicious
Squid Vicious's picture

fully broken market....

Thu, 04/26/2012 - 17:14 | Link to Comment bigdumbnugly
bigdumbnugly's picture

caveat emptor

Thu, 04/26/2012 - 16:59 | Link to Comment streetcrawler
streetcrawler's picture

Brian Wesbury told me earnings are up, so I think you are wrong.

Thu, 04/26/2012 - 17:01 | Link to Comment Nid
Nid's picture

Yeeeeeaaaahhhhhhhhh Stocks!!!!!

Thu, 04/26/2012 - 17:01 | Link to Comment Aunty Christ
Aunty Christ's picture

don't be sore, short some more

Thu, 04/26/2012 - 17:11 | Link to Comment Lucius Corneliu...
Lucius Cornelius Sulla's picture

Shorting Amazon is a dangerous prospect

Thu, 04/26/2012 - 17:30 | Link to Comment Westcoastliberal
Westcoastliberal's picture

Be a Man, short AAPL!

Thu, 04/26/2012 - 17:04 | Link to Comment monopoly
monopoly's picture

I did and was just about to post earnings. Profits down 30%, op margin of 1.5%. and collecting sales tax will not hurt earnngs. They are eating themselves alive. 

What a short soon, what a short. I will take that one. What a freaking broken market run by computers and Executives with dementia.

Thu, 04/26/2012 - 17:06 | Link to Comment monopoly
monopoly's picture

And a foward PE of over 100. Makes me want to roll my beads and chant again. :)

Thu, 04/26/2012 - 17:07 | Link to Comment Squid Vicious
Squid Vicious's picture

someday they will report $5 earnings for a quarter to justify this stock price, but by then even the youngest of momo traders will be spinning in his grave 

Thu, 04/26/2012 - 17:07 | Link to Comment Rainman
Rainman's picture

Standard op procedure for a market that embraces gimmicks and gizmos with gusto. The machines don't care how the number gets got.....they'll beat on this fucker like a rented mule.

Thu, 04/26/2012 - 17:08 | Link to Comment urrterrible
urrterrible's picture

AMZN is trying to put everyone else OUT of business by these cash burning strategies and low margins.  Best Buy is toast, Radio Shack is toast, Circuit City gone, HHGregg will be toast, Barnes and Noble toast, Blockbuster is toast, I could go on, but this internet thing is killing some businesses. 

Thu, 04/26/2012 - 17:11 | Link to Comment streetcrawler
streetcrawler's picture

Remember when Circuit City salespeople made commission? Now they are working in un-airconditioned Amazon warehouses shovelling shit into boxes for $7.50/hr with no benefits.

Thu, 04/26/2012 - 17:11 | Link to Comment monopoly
monopoly's picture

Yes, you are right. Many will be gone. But you still have to turn a profit to stay in business. BBY blew up CC, yet they themselves will be gone in a year or two. AMZN has great service and great prices but they are eating themselves alive.

Thu, 04/26/2012 - 17:17 | Link to Comment urrterrible
urrterrible's picture

I agree, I think they have a strategy of growth by bleeding cash righ now.  Who knows if it will work.....we do know they are bankrupting some businesses though.  I haven't been to the mall in 2 years, I used to go to Best Buy 10 times a year to look around and buy something.  Evolution of this business may not be the best thing for us, but it is here.

Thu, 04/26/2012 - 18:46 | Link to Comment geewhiz190
geewhiz190's picture

look around-there's a boatload of service providers like movers or printers, and any and all product sales providers that have  been hurt by the internet. sure it's great for the consumer, but there's probably a tipping point (that has already been hit) where middle income employers/employees are losing more than they are gaining.  great to have low low prices but pay for it with what? so guys like bezos can be worth a zillion dollars? the crowd that follows this web site should spend a week or two following the insider stock option exercises and sales of the stock in U.S. corporations.  the public puts money in one end, either through hedge funds or some mutual fund, and corporate management takes it out the other by exercising and selling their option grants.  the weekly numbers are staggering. the system works great at funneling billions of dollars from millions of "investors" into the hands of a very few. ever notice how all those CNBC commercials about how " I am american business" is always some CEO who's worth more than some countries? business media and "sell-side" wall street "analysts" know how to get those juices flowing. look at some of the tapes of cnbc from the 90's. the same group was there just pumping up the fires.  what a bunch of crap. 

Thu, 04/26/2012 - 18:48 | Link to Comment Tippoo Sultan
Tippoo Sultan's picture

Indeed - an Amazon Prime membership fee can pay for itself a dozen times over. A highly useful service.

Thu, 04/26/2012 - 17:39 | Link to Comment Lucius Corneliu...
Lucius Cornelius Sulla's picture

All of the cash flows back into the business for expansion.  Margins can easily expand if management decided to stop supporting the growth.  It is a choice.  But the business strategy is to take market share and expand the global digital and physical supply chain footprint.  Long-term I think they are solid.

Fri, 04/27/2012 - 01:52 | Link to Comment Tijuana Donkey Show
Tijuana Donkey Show's picture

The Internet kills anything it touches. In economics, a perfect market is where a buyer and seller find each other at the market price, which should have a zero margin, after paying the barrier of entry. Amazon is that business, and the fact that they can grow without loosing more money is astounding. Physical real estate is so 20th Century

Thu, 04/26/2012 - 17:11 | Link to Comment nflux
nflux's picture

I had to read through the report twice because i thought i HAD to be missing something since it was up big time AH. Glad to get conformation that my reading comprehension skills are still in place.

Thu, 04/26/2012 - 17:11 | Link to Comment CaptainTripps
CaptainTripps's picture

100% wrong..and the price action shows it. see you at new highs 

 

 

never bet against a great company like this..it gave you weeks to buy cheap too

Thu, 04/26/2012 - 17:14 | Link to Comment monopoly
monopoly's picture

But the PE is over 100. What is wrong with this picture. And they fire employees just days before they get 1,000 hours so they do not have to pay benefits. I mean, even AAPL has benefits for their employees, and they do not fire them. And collecting state taxes will not hurt them. That is absurd. 

This company will not be toast, but their stock will.

Thu, 04/26/2012 - 21:05 | Link to Comment you enjoy myself
you enjoy myself's picture

This company will not be toast, but their stock will.

exactly.  they're not going to go out of business, they're just never going to realize a profit that will justify its p/e.  they were/are indeed squeezing out competitors like best buy, barnes & noble, circuit city, blockbuster, etc, but that's because the companies being squeezed all had the gigantic anchors of big box physical stores.  if amazon ever decides to raise their margins in certain sectors then it'll be a matter of months (if not weeks) before other e-tailers jump into the fray.  ebay, for example, doesn't even want to bother with low-margin crap.  but they will enter any space, in an instant, that amazon stops lowballing.

and do you mean to tell me an enforced sales tax is not going to wipe out their 1.5% margins?  also, don't forget that there's likely going to be increased shipping costs - Fedex and UPS are not going to eat $100+ crude, and USPS is bankrupt.  that alone could wipe out their current margins.

 

Thu, 04/26/2012 - 18:00 | Link to Comment adr
adr's picture

Oh, I get it good companies are those that destroy jobs and the economy, yet increase thier share price. Nobody working, 250 million peope on food stamps, crumbling infrastructre but $1500 Amazon. All would be right in the world.

Without the stock market 99% of the fortune 500 would be toast the next day. Profit is a made up word, tricks conjured from accountants.

A real audit of any public corporation would find fraud on an epic scale. What keeps them safe is every corporation is in the same boat, go afteron you have to go after them all. It would end the ponzi in minutes.

Thu, 04/26/2012 - 17:12 | Link to Comment resurger
resurger's picture

"the company made $192 million in income from operations on $13.2 billion in revenue, or 1.5% profit margin, compared to what was considered abysmal 3.2% last year."

 

 

Fucked.

Up

Beyond

All

Recognition


Thu, 04/26/2012 - 17:17 | Link to Comment Darkness
Darkness's picture

Bullish?

Thu, 04/26/2012 - 17:16 | Link to Comment Abiotic Oil
Abiotic Oil's picture

They broke their own model.  Absolutely no value add to their merchandise and their multi-vendor environment has created a cut throat, price-matching, "we'll make it up on volume" race to the lowest price.  They really need to start carrying ammo.

Maybe Obama could buy them via Executive Order and provide them some more operating cash?  That is, after he is done raiding family farms with armed agents to stop them from "forcing" their children to milk cows and harvest hay?

Thu, 04/26/2012 - 17:17 | Link to Comment monopoly
monopoly's picture

Are you out of your mind. 28 cents. 28 CENTS, and it is a bullshit .28 Cents. How about 9 cents. The stock has a real worth of 35 with a PE of 25. That is 35 dollars. 

To put it in a real light.. That is about ONE OUNCE of Silver. Absurd.

Thu, 04/26/2012 - 17:18 | Link to Comment YesWeKahn
YesWeKahn's picture

buy, buy, buy, after fruit company, lets buy some amazon parrots.

Thu, 04/26/2012 - 17:21 | Link to Comment Jason T
Jason T's picture

Share count went down 2 million from 466 to 464 on over $1 billion in sharebuybacks??  This paper money system we have is disastrous.

Thu, 04/26/2012 - 17:22 | Link to Comment buzzsaw99
buzzsaw99's picture

I hope they can keep selling at no profit forever. Cheap shit for everyone!

Thu, 04/26/2012 - 17:23 | Link to Comment Jake88
Jake88's picture

A system that rewards failure will fail big.

Thu, 04/26/2012 - 17:43 | Link to Comment q99x2
q99x2's picture

The gang in Washington paid in FB shares gotta make good in the upcoming IPO. Otherwise Shcumer is going to be pissed.

Thu, 04/26/2012 - 17:48 | Link to Comment HowardBeale
HowardBeale's picture

Amazon, the longest running stock scam in the history of the world; the one that provided the blueprint for all subsequent counterfeiting operations...

Thu, 04/26/2012 - 18:43 | Link to Comment Inspiring More ...
Inspiring More Accountants's picture

Wow!  Room to make the absolutely pointless statement "Net sales increased 34% to $13.18 billion in the first quarter, compared with $9.86 billion in first quarter 2011. Excluding the $56 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales would have grown 34% compared with first quarter 2011." But no room to make any mention of where an $89MM equity income gain came from.  Watch the gains to disappear tomorrow....

Thu, 04/26/2012 - 19:24 | Link to Comment goforgin
goforgin's picture

The River needs to upgrade their SUPER SAVER shipping to Standard for everything. They are getting slower in deliveries. Also, price wise, they are not least expansive like they used to be.  It's time to get back to basics:

1. Price

2. Free Shipping

3. Speed of Deliveries

 

 

Thu, 04/26/2012 - 19:36 | Link to Comment InjuredThales
InjuredThales's picture

scAmazon.com

Thu, 04/26/2012 - 19:40 | Link to Comment no cnbc cretin
no cnbc cretin's picture

Rigged markets. Nothing is real anymore.

Thu, 04/26/2012 - 19:55 | Link to Comment sessinpo
sessinpo's picture

Oh yea, I just bought crap from Amazon. Get it while you can because it won't last forever. Also waiting on my next APEX delivery of PMs. And to top it off, getting ready for some major fishing weekend of May 5th. Even gonna use May fourth to fish just for bait.

Thu, 04/26/2012 - 21:30 | Link to Comment crawl
crawl's picture

Amazon Prime is a terrific deal.  As for pricing, it's dynamic.  You have to be patient to get the lowest price or near the lowest price with Amazon.

They have some of the best customer service in the world too.  But, with all the positive spin, I still wouldn't buy the stock.  Margins are way too thin for my liking.

Fri, 04/27/2012 - 01:53 | Link to Comment falga
falga's picture

Castle of cards with lots of accounting gimmicks. Meanwhile, they are hiring like crazy in the Seattle area...

Fri, 04/27/2012 - 02:02 | Link to Comment juwes
juwes's picture

this kind of unanimous bearishness was flatulently bursting out of every market junkie back in 2003. anyone here been trading that long or are you all just forking money over to the momos? so i will enlighten you early early birds who are dizzy with short excitement. this isnt the time to short amazon orprobably anything except perhaps treasuries. back to 03. market was crapping itself before W shocked and awed the history out of iraq and the market rallied more furiously then anyone could have dreamed. the momos just kept buying and everyone else stood there saying "how is this possible?". i doubt this run lasts as long as 03, but if im right i expect dow up 3000 from here in a few months, with interest rates rising in the markets shadow. those creeping interest rates will eventually destroy whats left of the skeleton being ass propped by the fed and then the market gets wiped out or hyperinflation makes it irrelevant. sorry for your confusion but numbers dont really matter. and if you are betting on this stuff its important to listen to your own good advice and not bet against a tide of ignorance that isnt interested in whatever numbers YOU say are important. that being said amazon is taking over the new mail order world which is not the world this sites visitors are used to, and their stealth technology is low margins... nobody sees them coming but when the stock hits 400 most radars will catch the bogey. Use the system while preparing for its collapse. fight it and preparing is ten times harder. id say good luck but i wouldnt mean it. penned in my kindle fire.

Fri, 04/27/2012 - 03:11 | Link to Comment Quarky Gluon
Quarky Gluon's picture

If we take as a given that the primary real fundamental value of any common stock lies in its ability or potential ability now or in the future to issue dividends, what is the justification for the high PE ration for AMZN.  I can understand the justification for a mining company that has rights to the 'mother lode' but hasn't reached it yet to have either a very high PE or even negative earnings.  When or if they strike it rich, then they'll have the ability to issue generous dividends.  But what is AMZN's mother lode down the road?  I just don't get it.  Or is there some other tangible underlying monetary value besides dividends for common stocks?

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