Amazon.com, Inc. (NASDAQ:AMZN)

CAPS Rating: 3 out of 5

Once simply an online purveyor of books, Amazon.com has become a marketplace for just about anything you’d want to buy.

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Player Avatar TMF1000 (99.73) Submitted: 8/20/2011 9:42:03 AM : Outperform Start Price: $61.47 AMZN Score: +289.67

Amazon was added to my caps at $61.47. I never wrote a pitch but I wanted to based on today's price of $178.93. I am looking for a good place to add to my position.

Amazon’s not cheap. It is trading at a high PE ratio, not a good way to measure value for Amazon. The cash flow yield is 2.2% which is a much better way to value them, but even by that metric, they aren’t cheap, so why buy? In my opinion, it is a retailer that can grow for decades. They remind me of Wal-Mart in the early 1980’s. They are the best answer to Wal-Mart.

Research company comScore has said that of the top 10 global retail and auction sites, Amazon Sites reached the largest global audience with over 282 million visitors in June, or 20.4% of the worldwide Internet population.

http://ecommerce.cbronline.com/news/amazon-sites-visited-by-...

Earnings and cash flow will take hits periodically as they build infrastructure to improve the shopping experience for their customers. They may not have brick and mortar stores like Wal-Mart, but they do have to have distribution centers. They are spending to support their web services too. So I don’t worry too much about the fluctuations in earnings and cash flow from year to year, but rather from decade to decade. They have a very nice cost advantage.

The market’s decline which also coincides with a year of significantly heavier capital investments could give us a great value point at which to add to our positions before the holidays.

Amazon is already an important part of global shopping. More and more people hit Amazon first when shopping online. And more people are shopping online than ever before. At some point, their web services are likely to be a multi-billion business too. I consider Amazon a core holding in my portfolio and one I plan on holding for the rest of my life.

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Member Avatar Lituus (89.45) Submitted: 8/23/2011 3:48:03 PM
Recs: 2

Well said, PLUS there is the massive upside potential via being a cloud services infrastructure provider. Then there is also the wild card plays of offering music sales/storage/delivery and video on demand. It is really phenomenal how well run Amazon is.

Member Avatar emotleyguy (45.25) Submitted: 8/23/2011 5:28:58 PM
Recs: 4

TMF1000

The over valuation you refer to is tough to explain, but if you have not already done so, look at the 10Q filed July 27,2011. while they have very impressive earnings growth and top line growth (even adjusting for currency exchange) there is a sleeper item. Do a control F search for AWS (Amazon Web Services). As you know this is their bet on being a top line provider of cloud services. CRM, AMZN, GOOG, MSFT, VMware and the like will control this critical web environment. Look at the dollars being focused on the continued development of this sector of their business. Couple that with the demise of Border’s and Amazon’s slow but persistent attempt to grow vertically by securing recording rights and publishing rights, you have the makings of an amazing organization. And it would be an amazing organization with obscene margins. The only that will keep that from happening will be a draconian legislation against AMZN specifically. Fears about retail sales tax and the inevitable VAT tax in the US should be equally applied to all sector participants so AMZN will rise and fall with the tide. If the government torpedoes AMZN directly than that is a different scenario. Hope that helps. Here is the link to the SEC page for their 10Q if you need it.
http://www.sec.gov/cgi-bin/viewer?action=view&cik=1018724&accession_number=0001193125-11-197823&xbrl_type=v

Member Avatar Varchild2008 (85.88) Submitted: 8/26/2011 1:06:58 PM
Recs: 1

When are Expenses going to stop outpacing sales like in the last few quarters?

The EPS weaknesses in AMZN are noteworthy in that they have nothing to do with Top Line growth or Sales or etc.
It's all expansion expenses.

I worry that a Global, Euro-Zone, meltdown along with America's basically flat GDP growth is worrisome if Amazon doesn't keep their expenses in control. They are planning to hire around 1,000 - 1,300 employees just in 1 State (Tennessee I think? maybe)
in America alone. That's a lot of cost added on in the face of a pretty weak economy.

Member Avatar Popnfresh100 (24.34) Submitted: 9/12/2011 3:28:14 PM
Recs: 1

I don't think they can last- let alone grow- for decades.

Their business model is too interdependent on things that may go away.

Everyone knows about the tax thing. But it's so much more than that. What would happen to Amazon if something happens to the internet (as we know it), to the post office, to the foreign and domestic treasury bonds that they rely on to pay bills every quarter, or to the goodwill from suppliers that allow them to continually jack up accounts payable?

We take these things for granted, but they are not. Net neutrality may not last much longer and Facebook may replace Google, the post office is endangered, bonds are in a dangerous bubble. Suppliers don't need Amazon.

On top of that, two day delivery is fine- for now. But in the future I'm pretty confident people will want same day delivery or better. The logistical difficulties have prevented these services from flourishing yet, but when they do break though, traditional brick-and-mortar stores and startups will be better positioned to provide the service than distant warehouses. Longer shipping times = higher delivery prices. Why would you pay more to get things later?

Amazon is a fine momentum play, but I find it irritating, and in fact dishonest, when people claim it is a good long term investment.

Member Avatar TMF1000 (99.73) Submitted: 9/13/2011 11:02:54 AM
Recs: 12

Hi popnfresh100

Amazon has been a great long-term investment. To call it merely a momentum play would be similar to calling Walmart a momentum play in the 70's and 80's. They were, but they were also a solid investment.

Amazon has returned an annual compounded return of 39.51% since going public in 1997 or 14.5 years ago. I own Amazon and I have been very happy with them.

Do you know about the tax thing? Did you know their customers pay state taxes or state tax equivalent on over 50% of their business. According to Amazon, it hasn't negatively affected their business in those states. they can survive state taxes any good retailer can. I live in Kentucky and I pay sales tax on all of my Amazon purchases. It doesn't keep me from buying. I think their customers should be made to pay state taxes. That is only fair. It won't hurt them.

Some of your concerns are very pessimistic. For instance, no post office? Even if the post office were to go away, do you not think it is because of competition and that there are private companies just waiting to take over that business and could probably do it much cheaper than the government. I like the post office, so I hope it doesn't go away, but there are private companies ready and willing to take over those duties. Federal Express is doing a very good job with packages as is UPS. This isn't a threat to Amazon.

No Internet? Why not consider an all out destruction of the U.S by Martians that would hurt Amazon too. hehehe I don't see the Internet going away

Two day delivery? I have never opted for two-day delivery. I much rather pay less money and get it in a week. A week for me isn't much time to wait. I know many people today seem to need instant gratification, but I don't. I can wait a week to get my Amazon's packages.

And Amazon Prime allows for free shipping, but you have to pay an annual fee. This not only pays shipping, but encourages people to buy often to make up for the annual fee, much like Costco's annual fee to shop there.

I am a big Amazon customer. I buy many things there. I purchased an oversized litter box for my oversized cat because Petsmart didn't have one even close to big enough. I recently purchased a geologist hammer because no one here sells them. I like breaking open rocks to see the crystal formations inside. You may be surprised that crystals can be found in rocks other than geodes. But you need a solid steel hammer to break them open safely. A wooden handle hammer might snap or not provide the weight needed to break open the rocks. I also buy old books that cannot be found other places. I have bought stock market books published in the early 1900's so to get some first hand information of what people were thinking during the Recession of 1907. I could not even hope to get those books from a brick and mortar store.

Distant warehouses? They aren't so distant anymore. They keep building them and getting them closer to their customer base.

You speak of logistical difficulties preventing the services from flourishing yet? But most brick and mortar stores have flourishing websites. And Amazon is selling over $40 billion in goods a year. They aren't selling as much as Walmart who is selling over $400 billion a year, but they are catching up. They are growing faster than Wal-mart.

Target is selling only $68 billion in sales each year and for many years Amazon ran their website. So to buy products from Target from a website you had to buy it at Amazon. Target recently ended that deal with Amazon. They realized that Amazon was growing too large and now fear them.

I order something from Amazon at least once a month and usually I get the products within one week. I am fine with that. What I hate to do is go into Wal-mart, fight for a parking place, squeeze through the small shopping lanes, and long check out times. I much rather wait a week than go through the crowded stores. I also opt to go to dollar stores and I never shop for groceries at Wal-mart choosing Whole Food Markets, Fresh Markets or the many farmer's market that we have during spring and summer.

Risk to brick and mortar: shop lifting. Brick and mortar stores lose much to shoplifters - Amazon don't have to worry about that.

There is risk to Amazon, but its not a business risk. In my opinion, the great risk to Amazon is its valuation which is high, thus the need for a long time horizon. During the recession, Amazon dipped to a very nice valuation, without another recession and deep market drop, it will be very hard to get them that cheap.

I hope in twenty years we can have this conversation again. Today Amazon's market cap is $98 billion market cap company. In 20 years it will be much larger. Even the mighty Wal-mart might tremble.

But if you believe Amazon is a bad investment then you shouldn't invest in them. But I own them and plan on adding to them and holding them for the next 20 years.

tom e

Member Avatar RedScourge (21.53) Submitted: 10/6/2011 6:28:36 PM
Recs: 4

"I don't usually invest in companies with over $100 billion market cap, but when I do, I invest in Amazon!"

Member Avatar jwray01 (99.84) Submitted: 10/19/2011 12:46:30 AM
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Short of an apocalypse, nothing is going to kill the internet or the shipping that Amazon depends on.

Member Avatar Varchild2008 (85.88) Submitted: 10/25/2011 7:50:06 PM
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"Risk to brick and mortar: shop lifting. Brick and mortar stores lose much to shoplifters - Amazon don't have to worry about that."

So no one robs the Shipping Trucks that Amazon has coming out of their shipping centers throughout the entire world?

No one robs the Shipping Centers themselves???

Wow! That's a fantastic track record to avoid theft like that....But, show me the Carfax just incase your thesis isn't correct here?

Member Avatar Varchild2008 (85.88) Submitted: 10/25/2011 7:54:52 PM
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http://gigaom.com/cloud/amazon-aws-elastic-map-reduce-hadoop/

Good article above. THEFT is an issue with AMAZON. Products they sell don't just Materialize out of thin air after you place your order. They have to be protected from Theft in their 200 warehouses/shipping centers.

Thankfully Amazon probably has a solid handle on this....But, I don't think it wise to assume Amazon has never experienced Theft before and never will in the future.

Member Avatar Morgana (< 20) Submitted: 11/10/2011 9:15:27 AM
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1. Post offices get zero! federal funding. 2. If post offices go away, only profit making cities will get packages. Smaller, out of the way places are not profit making and therefore will fall off the "postal route." The Post Office functions because the big cities pay for the service to the small little towns. 3. If the post office goes, the private mail services will jack up their prices. What effect will that have on Amazon? 4. Post Offices "SEEM" to be in trouble because of a law that makes the post office pre-pay their pensions for several generations . . . something that no other company is required to do. Hmmmmm what can Congress do with all that money?

Member Avatar valuemoney (99.99) Submitted: 12/22/2011 1:28:19 AM
Recs: 0

You will likely see a price of $130 or less so I would wait till then to add. Personally I wouldnt buy it until it got around $102.

Member Avatar ndavis90210 (86.65) Submitted: 4/2/2012 1:10:25 AM
Recs: 1

"Hmmmmm what can Congress do with all that money?"

Unfortunately, very little....

Member Avatar CassidyLee (< 20) Submitted: 5/28/2012 9:35:54 PM
Recs: 1

I have been trading AMZN for a while now. I got alerted well before the volume started to pick up and because of this I was able to score a nice profit a few times. The report helped me get a better understanding of the stock and its trends. It’s always best to know and understand the stock before you buy. Check it out at vippennystocksite.com (Kindly, copy and paste the link in to your browser.)

Member Avatar TMF1000 (99.73) Submitted: 5/31/2012 11:02:35 AM
Recs: 0

Thanks cassidylee,

I will check it out

tom e

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