Amazon.com, Inc. (AMZN)

tengrandchicago (90.71) Submitted: 1/02/08 8:43 PM

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I agree with your assessment. I'm not sure where Mr.Manahey from Citi derives his analysis that AMZN will have operating mornings move up a full 2% points in 2008. I did a full valuation on AMZN, and it is highly overvalued. Where are they going to boost margins from? Gross margins will be under pressure with increasing commodity costs. That only leaves SG&A to optimize and trim up. Squeezing 2% out of this based on their track record will be extremely tough.

Even if we give the company the benefit of the doubt and they somehow can squeeze that margin boost out, when you do a full discounted cash flow analysis on AMZN, they will still be nowhere near these current trading levels.

The company does a good job of breaking out their revenue streams by product categories in their quarterly and annual statements, but you'll be hard pressed to find any break out of their digital ventures (Unbox), etc. It will take some time to see whether the Kindle initiative will really boost bottom line results. If you look carefully at their investment in web development expenses from 2006 to 2007, you will see a big increase in spending in Q3 of 2007 compared to the same period a year ago. Putting investments into Kindle is a gutsy and somewhat innovative move, but until the company proves me wrong, I don't think the Kindle will have that big of an impact to the company's profits.


Great company, good web site, just too lofty a valuation at the moment to get in. I am losing big time on this as well, but will keep my pick to see where this goes.

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Toprope101 (99.19) Submitted: 1/08/08 10:55 AM

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American's are not the only people that buy from Amazon.

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UniqueMiner (< 20) Submitted: 1/14/08 6:58 PM

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So, who else does? UK? Is there another country that has the buying power of the US that we should be considering in our numbers here? Don't hold back on this great economy we have seemed to miss. I will continually refresh my browser anticipating your reply.

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tengrandchicago (90.71) Submitted: 1/14/08 10:59 PM

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They also operate in Japan, Canada, UK, Germany, France, and China... If you look at their annual report, almost half of their revenues comes from outside the US. I do give Amazon credit for expanding their business beyond the US, as it may help deflect the hurt we are about to encounter. However, as an investment I wouldn't touch AMZN until the valuation gets into check. I did a more detailed analysis of the company's business here:

http://tengrand.blogspot.com/2008/01/dangers-of-amazon.html

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Deliman8 (< 20) Submitted: 1/29/08 12:36 PM

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If I were you I would end the underperform of Amazon because it will continue to rise through 2008, It has strong potential for growth as one of the cheapest retailers around. I personally receive a package from Amazon around every other week because of the cheap prices, a wide array of choices. It is also growing its subscriber base where people actually get Food and other household items delivered to them, which seems promising.

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Broken196 (< 20) Submitted: 3/22/08 4:37 AM

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I agree that Amazon has more room for growth with more and more retail pushing online. I purchase most of my products online and find that it's a growing trend among people I'm in contact with. Amazon is always my first choice to look for an item because of their massive and diverse inventory. Another thing to add (although it might sound silly) their user interface is one of the pleasing and easiest to use out of any online retailer and I think that helps add a positive experience for the customer.

Having Amazon at least for the holidays is a no brainer.

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drianu (< 20) Submitted: 4/03/08 7:27 PM

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Amazon makes much of it's money oversees. Additionally, many people use amazon specifically because of the down economy. They are also the owners of half.com, and generally are able to offer significant discounts because of their buying power. I also believe that mturk is going to end up being a boon in coming years.

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