I will probably get down voted but I think it's because we are in for a big downturn this year. Amazon is preparing for that and they will garner more market trust because they can show profits. When the bust happens, people are going to be very careful on what stocks they invest in and will most likely lean towards safer, profitable companies.
Why is Amazon all of a sudden not re-investing all its profits?
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Re: Why is Amazon all of a sudden not re-investing all its profits?
#62Maybe the stockholders are getting restless. At some point, they have to pay dividends. Amazon is too big to be bought out.
Much of Amazon's expansion is in physical facilities. Those are hard assets which can legitimately be financed with debt at low interest rates.
Re: Why is Amazon all of a sudden not re-investing all its profits?
#63Because that was the plan all along? At some point Amazon is going to get a return for all of its investment. The entire market is now dancing to Amazon's tune. Why not now?
Bezos understands that the value of a stock is its discounted future cash flows.
Discounted future /free/ cash flows.
That's cash flow minus capital expenditures which means, at some point, Amazon is going to have to decide enough is enough and allow overall cash flow to come in well above its capital expenditures...like it's just done. Better a bit sooner than later (thanks to the discount part) if you think can sustain your advantage for less than you've been spending in proportion to your revenue.
Perhaps Amazon has reached some sort of cruising altitude.
Re: Why is Amazon all of a sudden not re-investing all its profits?
#64I find it very interesting to know what Amazon's competitive advantage would be from having their own logistics business. 1) Shipping is the definition of a commoditized business. Unlike AWS, for example, they will not be pioneering a new business model or technology. 2) What they pay right now to FedEx, UPS, USPS, DHL, OnTrac, etc. should be very close to zero margin, given their position to negotiate those companie…
> Shipping is the definition of a commoditized business. Unlike AWS, for example, they will not be pioneering a new business model or technology. I'm guessing it's the one-hour-delivery thing - last year they started testing one hour delivery for popular products in a couple of pilot cities.[0] Presumably they can't do one hour delivery with a traditional model of centralised-warehouse -> shipping company -> shipping…
There are two components to Prime Now, at least in NYC.
One is products that seem to be sold from an Amazon controlled or contracted warehouse, and the other are products sold by local businesses (e.g. produce from Westside Market).
Re: Why is Amazon all of a sudden not re-investing all its profits?
#65Summary: Because they're "proving" they can make a profit when they want to in preparation for spending a decade investing 100% of profits into building a world-wide logistics system. (I think it's an interesting theory, but the author provided little evidence.)
I don't think any company will wait a few quarters to invest in something. And if they did that and win, well, they have invented a time machine.
Most big projects require a research & planning phase where a small team tries to learn everything possible about the domain, works out exactly what the opportunities are, and runs a few small trials to verify their assumptions. This is not capital intensive, and it's a good time to build up capital & goodwill for the rollout.
Re: Why is Amazon all of a sudden not re-investing all its profits?
#66Because we transitioned to the next step of the Bezos Singularity State Machine.
Re: Why is Amazon all of a sudden not re-investing all its profits?
#67I will probably get down voted but I think it's because we are in for a big downturn this year. Amazon is preparing for that and they will garner more market trust because they can show profits. When the bust happens, people are going to be very careful on what stocks they invest in and will most likely lean towards safer, profitable companies.
Are you saying Amazon have built a tool to time the market?
Re: Why is Amazon all of a sudden not re-investing all its profits?
#68Summary: Because they're "proving" they can make a profit when they want to in preparation for spending a decade investing 100% of profits into building a world-wide logistics system. (I think it's an interesting theory, but the author provided little evidence.)
I don't think any company will wait a few quarters to invest in something. And if they did that and win, well, they have invented a time machine.
I didn't mean to imply that they are waiting. This is just one part of the preperation stage, so to speak. In fact they already have begun. (see the end of the article for links to rumors and actual current movements into logistics by Amazon.)
The timing and the incentives (employee retention) line up.
Re: Why is Amazon all of a sudden not re-investing all its profits?
#69I will probably get down voted but I think it's because we are in for a big downturn this year. Amazon is preparing for that and they will garner more market trust because they can show profits. When the bust happens, people are going to be very careful on what stocks they invest in and will most likely lean towards safer, profitable companies.
Are you saying Amazon have built a tool to time the market?
No of course not. The writing is on the wall. Amazon is just being very smart about it. This is a smart move imo.
Re: Why is Amazon all of a sudden not re-investing all its profits?
#70Earlier quoted context omitted.
Bezos is in it for the long haul. He's probably the most impressive business person there is right now. Buffett and Musk are impressive in different ways.
Sorry, but Bezos and Buffet are not even in the same league as Elon Musk.
I think that is shafting Bezos short. His company has built a vast logistics empire. Imagine maintaining millions of product categories, keeping their price up to date, sycing all of that through vendors, suppliers, and finally delivering it to the customer. Not to mention, this happens across multiple countries. That isn't a small feat.
I am not even touching on the foresight of AWS or his stewardship of the company in general. I think he deserves far more credit than you are giving him.