Real, physical things that have to be stored somewhere, that have to be shipped places. Books, toys, electronics, all kinds of things. Facebook and Twitter ( TWTR) sort of are.īut not Amazon. International Business Machines ( IBM) is. But earth to analysts: Amazon is not in the cloud-computing business. Analysts have been praising Amazon's cutting-edge cloud computing tools, for example. Sure, the company has been making investments in its infrastructure. If you think there is any chance at all of interest rates increasing in the future, that is going to be a serious problem for Amazon to deal with at the point that they need to refinance this debt.Īmazon and the art of distracting shareholders I will give you that revenues increased by double, but so have their interest expenses, and on the balance sheet, their long-term debt has tripled. That was on a multiple of earnings from 2010, their best year to date. At the point where I said to sell before, they were 158 times. Nine hundred and twenty times trailing earnings.Įven if you used their very best year, the company still trades at a ridiculous premium of 253 times earnings. The company's twelve trailing month price to earnings ratio is over 920. This year to date, they have only made 24 cents.
Over the last ten years, the most Amazon has ever made in any one year was $2.53 per share in earnings. Speculators certainly wouldn't look at the stock price, now having doubled over this year to date, and think there was anything wrong. Most people wouldn't call Amazon a failure though. Why seek expansion if you are running an unprofitable company? That only transfers the burden of your failures to other people. In my opinion, they shouldn't even go public if the company doesn't have a history of earning money. A business needs to be profitable to justify investing in it. And I consider this to be the most important thing. Here is what I understand about businessesĪll businesses. It's notable to me because there are a subset of individuals there responding to that posting that I have the utmost respect for, and they were telling me that I didn't understand the business well enough.īut just two days after posting that, the stock proceeded to lose a quarter of its market cap, taking the stock down over the next year: I have a notorious Facebook (FB) posting that I made two Christmas seasons ago in the "Value Investing" group, mentioning that I thought the stock was expensive: It's been a good amount of time, but I have been bearish about Amazon ( NASDAQ: AMZN) before. , original artwork by HextupleyOodot, Deviantart)
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