Important tidbit buried in there: "Amazon said it lost 60 cents a share in the third quarter, but more than half of that was from its investment in the daily deals site Living Social"
Amazon Reports First Quarterly Loss in 4 Years
21–30 of 87 posts
Re: Amazon Reports First Quarterly Loss in 4 Years
#22Earlier quoted context omitted.
>a lot of their spending is on important business stuff (warehouses, kindle, web properties) that will yield returns later This has been the Amazon story basically since founding. At some point, a company needs to yield real returns on their investments.
Wal Mart's profit margins are only a few percentage points, maybe 5% if they're lucky. That's the nature of retail. There definitely seems to be some utility and efficiency gains being made by Amazon. I doubt investors are seeking the kind of explosive growth or profits seen in tech companies like Apple, but rather a steady gain in market share from companies like Wal Mart, Best Buy, and whatever else you can deliver…
Hmmm I wouldn't normally say a P/E of 272.63 is a bet on slow steady growth.
Re: Amazon Reports First Quarterly Loss in 4 Years
#23Earlier quoted context omitted.
I'm guessing everyone is waiting until Amazon is the only game in town and can increase margins every product but those that would allow a new competitor to survive to profitability. Once they are in a position to increase margins without risk of lost market share, the current valuation will be justified.
Fresh competition is never more than a click away. I get that Amazon is playing the long game, forgoe profits now to build a dominant company for the future. But how long have they been playing this long game for? How much longer before it pays off? This is a 17 year old company. People younger than Amazon are getting married and having kids.
> Fresh competition is never more than a click away.
Two clicks, actually. They have a patent on one click.
Re: Amazon Reports First Quarterly Loss in 4 Years
#24With its price-to-earnings multiple in the stratosphere, Amazon often comes up in conversation as being "overpriced." While this conclusion may be true, it's not because Amazon is unprofitable...
Publicly traded companies optimize for return-on-invested-capital (ROIC), which includes profits (dividends) plus increases in equity value (share price).
Stable companies in stable markets often make the greatest returns by increasing revenue and reducing costs (i.e., optimizing for earnings). Companies in high-growth markets (esp. competitive ones) typically optimize for long-term market share/growth (which manifests as increases in equity value). Amazon falls into the latter category.
Not sure this makes sense to/helps anyone, but yeah, that's why Amazon operates the way it does.
Re: Amazon Reports First Quarterly Loss in 4 Years
#25Shares already recovering, loss was "better" than expectations, a lot of their spending is on important business stuff (warehouses, kindle, web properties) that will yield returns later. In other words, revenue is nearly identical and there's no profit, presumably because of these new things. Amazon is one of the few very large companies that has extremely high potential for growth. I made an OK amount of money buyin…
Back during the dot.com days Yahoo Finance had a game where you could "play the market." (take note entrepreneurs this could be a lifestyle business :-) For each group you got $100,000 to invest and you were in competition with other people in your group for best return. I lost about $75,000 on Amazon stock :-).
However, my actual portfolio has done ok with Amazon so I'm not complaining.
Re: Amazon Reports First Quarterly Loss in 4 Years
#26Earlier quoted context omitted.
I'm guessing everyone is waiting until Amazon is the only game in town and can increase margins every product but those that would allow a new competitor to survive to profitability. Once they are in a position to increase margins without risk of lost market share, the current valuation will be justified.
> Once they are in a position to increase margins without risk of lost market share That day may never come. edit: Every quarter with margins in the single digits is additional evidence that it won't.
Single digit margins on $14 billion dollars in quarterly sales is still lots of money. 2.5%, as an example, is 350 million dollars a quarter, which is still 1.4 billion dollars a year.
Re: Amazon Reports First Quarterly Loss in 4 Years
#27Shares already recovering, loss was "better" than expectations, a lot of their spending is on important business stuff (warehouses, kindle, web properties) that will yield returns later. In other words, revenue is nearly identical and there's no profit, presumably because of these new things. Amazon is one of the few very large companies that has extremely high potential for growth. I made an OK amount of money buyin…
Back during the dot.com days Yahoo Finance had a game where you could "play the market." (take note entrepreneurs this could be a lifestyle business :-) For each group you got $100,000 to invest and you were in competition with other people in your group for best return. I lost about $75,000 on Amazon stock :-). However, my actual portfolio has done ok with Amazon so I'm not complaining.
I did something similar to this in high school a few years ago. I ended up losing to another team in the class that bought Gamestop and other related stocks. I stuck with stocks like Intel and GE. If the game had ended even a two weeks later, I would have won.
These games teach high school students very little about investing, especially long term. The other team's strategy was simply "I play video games and I like Gamestop, so let's buy Gamestop!".
Re: Amazon Reports First Quarterly Loss in 4 Years
#28If I had any cash sitting in my brokerage account, I'd probably buy a few more shares of AMZN with it right now.
> If I had any cash sitting in my brokerage account, ...
Uh oh, classic indicator.
Re: Amazon Reports First Quarterly Loss in 4 Years
#29Say what you want about some of their other business practices, but they appear to have successfully destroyed rents in the retail industry, which is great for consumers of retail. Regardless of how they do for their shareholders, that is a real benefit to society. Right?
That is a difficult question to answer. A good parallel to what amazon is doing to retail is what globalization did to manufacturing. As we all know, manufacturing in the US has been gutted and is now largely based in developing countries. While this is good for the consumer because products are cheaper, this also resulted in a great deal of unemployment for a certain category of workers (primarily low skill). Retail, which is also a major employment source for low skill workers, is now facing similar pressure from companies like Amazon, who employ significantly fewer people than the companies that they replace.
Ultimately, developed countries are going to have a difficult time finding good paying, reliable jobs for low skilled employees. This is an inevitable by-product of our shift to a globalized, modern economy and is one of the primary reasons why the US and Europe are struggling to keep their social safety programs solvent.
Re: Amazon Reports First Quarterly Loss in 4 Years
#30About two months ago I was thinking that the bubble, of which everyones been talking about for the past years, might finally pop soon. I thought I might short some major tech companies and make some money off of it. I had two indicators that I was looking at to determine the start of it:
1-Zynga begins laying off people. (really, any big web 2.0 company begins laying off people, but zynga seemed like the logical choice.) The way I see it is this: if a flood of veteran web-devs, artists, PMs, etc hit the SF market, salaries will go down slightly as demand goes down. Since techies spend their money on tech, this will lead to revenues going down within the industry. This will begin a positive feedback loop because everything seems to be built on top of itself right now.
2-Second indicator is that Amazon's stock would fall. This is because they are essentially the bellwether of the tech industry: everyone runs their stuff on AWS. If their revs go down (which it doesnt look like they have), that means companies are feeling the pinch. Again, a positive feedback loop could quickly ensue.
Now that my two indicators have come to pass, I still don't believe strongly enough in the bubble theory to short the industry. But if anyone else wants to take my theory to the bank, I would be happy to take a 10% referral fee on any and all gains :)