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Varchild2008 (83.57)

See? Varchild TOLD YOU SO!!!!

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October 25, 2011 – Comments (12) | RELATED TICKERS: AMZN , NFLX

Remember when I kept screaming on my Blog and in replies to other people's Comments on the AMZN chart that AMAZON = low low low margins...lots of spending.....and what happens when spending keeps climbing while sales growth slips?

Well???  Now we know.   Amazon just reported third quarter earnings was down 73%.  Income from over 200 Million to just over 60 million year over year.

That is quite a slip.....But can it entirely be blamed on "Spending?"  I doubt it.  I am not listening in on the Earnings Conference Call but I suspect the EUROZONE Slowdown is to blame.

Amazon is far more exposed internationally versus some Bricks and Mortar competitors like Best Buy and Sears and Lowes and Home Depot and CVS and Walgreens and yes...my 1 and only investment stock Gamestop.

So with the collapse and huge REALITY CHECK with (NFLX) and now (AMZN) maybe Wall Street will start to understand that there is strength in having a HYBRID business of BRICKS + DIGITAL.....

Instead of Borders and Tower Records = 100% Bricks.
AMAZON and NETFLIX = 100% Digital.

Hey! There is a key reason why Apple chose to open up retail stores....

There is a reason why SONY decided to try its hand in Sony Stores (albeit they have a very small number of them).

Ultimately....There's key advantages in having Bricks Stores right there advertising, marketing, and selling your merchandise.....versus hoping for Online Shopper Growth to Sustain itself in a down economy.

There are advantages to BRICKS....folks.....Seriously.... DO YOU BELIEVE ME NOW???

(FAKE VERIZON COMMERCIAL)  BELIEVE ME NOW????  BELIEVE ME NOW??? GOOD!

12 Comments – Post Your Own

#1) On October 25, 2011 at 5:58 PM, truthisntstupid (89.22) wrote:

I doubt if you'll change any one-track minds, Varchild.  I can only say they infuriate me, too, as they seem to be cheering for the demise of my all-time favorite place to go.  I live 80 miles from the nearest Barnes & Noble bookstore and when I have to go into Springfield (I live in Missouri) I always look forward to going to Barnes & Noble.

They think everyone's going to want to buy everything online.  I can't imagine wanting to ever go anywhere in the ghost town of a landscape the Amazon nuts seem to be hoping for.  

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#2) On October 25, 2011 at 5:58 PM, Varchild2008 (83.57) wrote:

Whether it is HERE or on Yahoo finance....

I've made it perfectly clear that DIGITAL isn't what it is over hyped to be.... Not when you have bandwidth costs and other costs...growing and growing,...

Interesting that apparently it was made clear that NFLX margins are worse for streaming versus DVD.  Well?  DUH!!!!!!

I as a single customer can sit around streaming stuff all day...
Whereas I am restricted to 2 DVDs at 1 time.

How in the world does that business model make any sense?

Instead or RAISING PRICES on customers how about restricting the streaming?

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#3) On October 25, 2011 at 6:02 PM, Varchild2008 (83.57) wrote:

BKS is sooooooo undervalued right now.  My CoWorkers aren't buying KINDLES..... They are buying NOOKs.

I am either buying a NOOK COLOR soon or I am buying the mysterious "Gaming Tablet" that may or may not happen this year.

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#4) On October 25, 2011 at 7:06 PM, davejh23 (< 20) wrote:

Sales didn't really slip though.  They increased spending on product development, which slashed margins to near-zero.  This looks like a strategic move that could pay off long-term.  Just like NFLX has made a strategic to boost spending on expansion, risking losses over several quarters, in order to put themselves in a better long-term position...I don't believe NFLX is going to survive long term though.  I like Amazon as a company, but the stock would have to fall ~75% before I'd consider becoming an investor.

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#5) On October 25, 2011 at 7:08 PM, ikkyu2 (99.34) wrote:

AMZN is buying market share with that lost profit, Varchild.  Check in again in 10 years.

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#6) On October 25, 2011 at 7:10 PM, truthisntstupid (89.22) wrote:

Yeah...since it "plunged" now AMZN is "only" priced at 161 times it 7-year average earnings. 

 

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#7) On October 25, 2011 at 7:39 PM, Varchild2008 (83.57) wrote:

"Sales didn't really slip though. "

Yes they did from an anaylst prespective....growth perspective.

The Revenue came up short....and on top of that was the bleak forward looking statements...falling short of expectations.

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#8) On October 25, 2011 at 7:41 PM, Varchild2008 (83.57) wrote:

"AMZN is buying market share with that lost profit, Varchild. Check in again in 10 years"

Perhaps..... Or it is over expanding....way too fast....during a severe threat in Europe that they could be sliding into recession.

They are building shipping centers this year in the double digits.

This strategy Amazon is utilizing is a great strategy if we had a Global Growth, Economic Boom scenario.

Instead?  It is JEFF BAZOS...FULL SPEED AHEAD!!!!!!

RAMMING SPEEEEEEEEED!!!!!!

I just hope they see the iceberg before it is too late.

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#9) On October 25, 2011 at 7:45 PM, Varchild2008 (83.57) wrote:

AMAZON is throwing Caution into the wind...

BUY BUY BUY BUY BUY......EXPAND EXPAND EXPAND EXPAND....

They even so much as said they aren't concerned about the Cost to manufacture these Kindles....They just want to get them into the hands of customers at any cost.....and ultimately the $$$$$$ will come later when books are ordered and.....so forth....

Well....fine strategy but Consumer Confidence is at a 2.5 year low.

So....GOOD LUCK WITH RAMMING SPEEED!!!!!

I prefer companies build solid cash flow....solid cash on balance sheet....and do what they can to cut costs...now increase them....increase Margins....now Slash Them.

There's a time for this kind of Risk Taking....and now isn't the time...  Slow and Steady wins the race....

Instead we have a Rabbit throwing Caution into the wind....flying forward not even bothering to care what is in its path.

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#10) On October 25, 2011 at 7:46 PM, Varchild2008 (83.57) wrote:

oops now = not.

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#11) On October 25, 2011 at 9:54 PM, wolverine1987 (< 20) wrote:

WOW. Really? Barnes and Noble? Wow again. While there is certainlly much to legitmately discuss regarding AMZN the stock, regarding AMZN the company the verdict is already in--and Barnes and Noble is the walking dead. If your bragging, constant ALL CAPS and !!! didn't disqualify your analysis and mark it as completely and totally off base, your promotion of the Nook--which won't even be a product in 2 years-- and preference for BKS has. This opinion quite literally is ridiculous. 

To be clear, AMZN may or may not be at it's apex as a stock--but again, as a business, it has no peer--and certainly, and factually, that peer is not BKS. John Malone knows that, the smartest Hedge Fund managers know that, and most importantly, the consumer voting with their wallets has already made that decision. But hey, you and your nook have fun, I sincerely hope that they do not go out of business. 

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#12) On October 31, 2011 at 3:25 PM, Hawmps (< 20) wrote:

 "Perhaps..... Or it is over expanding....way too fast....during a severe threat in Europe that they could be sliding into recession.

They are building shipping centers this year in the double digits.

This strategy Amazon is utilizing is a great strategy if we had a Global Growth, Economic Boom scenario.

Instead?  It is JEFF BAZOS...FULL SPEED AHEAD!!!!!!

RAMMING SPEEEEEEEEED!!!!!!

I just hope they see the iceberg before it is too late. "

----------------------

I had to re-quote that for my rebuttal.  Consider this....  AMZN is taking advantage of a depressed real estate market by building new shipping centers when...

1) land values are down considerably and they can pick up well located parcels at a discount

2) the construction industry in every aspect is down considerably and they can take advantage of contractors low balling bids to get work and get their distribution center built on the cheap, depressed materials prices because few people are building and there are surpluses and the surpluses need to move to make room for new materials coming in that need a place to go. 

There is a reason why the national warehouse market is the one sector starting to pick up with higher occupancy and investors are buying. How could you take the tone that AMZNs expansion is a stupid move?  Looks to me like AMZN is taking advantage of the current environment and positioning itself for a return to economic growth in the next few years.  I agree that overall, a hybrid bricks/digital system is best for most companies as a general rule, however there are always exceptions to rules and AMZN has been doing this online business for how long now?  And they have grown to be how big now?  AMZN does not need bricks and mortar retail... they have Wal-Mart, Target, Toys R Us displaying the same stuff on their shelves for them.  People actually go to these stores, see stuff they want, and go home and order it.  Obviously not everyone because these stores are very successful too, but people do it and that should not be ignored.  Especially when they are looking for gift ideas and they can go home to their computer in Los Angeles, place an order, and have it drop-shipped to Chicago or anywhere else in the world and not have to personally deal with USPS, UPS, or FEDEX.  Convenience sells

That said... I do think that AMZN is overvalued and I do not own any shares.  But, the business model is not far from brilliant.  One thing (not the only thing) that I am convinced of that brought down Borders… high priced real estate contributing to high overhead allowing AMZN to undercut everything Borders had.  Everywhere you go in the country, where do you find Borders?  In the hot, it, now, high priced retail corridors, ie. steep rent.  And you can count on the lease going up 3%-5% at renewal every 3-5 years multiplied by how many stores.  This is a recurring major increase in overhead that AMZN does not have to deal with.

Anyway, that’s my $0.02

 

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