For a long time this company has been beaten up by the Wall St. analysts. Nobody can deny how much revenue AMZN takes in but when will it ever turn a profit?
This conversation never really stopped. It's the kind of conversation that all Internet companies used to have back in the late 90s. AMZN never really outgrew it.
In 2013 and 2014, the narrative was that the Street was fed up with Jeff Bezos. They wanted to see actual profits and they want to see it now. The trouble with AMZN in their mind is that while it does many things very well it does a whole lot of other things that seem to have no bearing on profits.
That's one of the prejudices of the analysts. If it doesn't turn a profit a company shouldn't do it. Ok this might be understandable if you can show that this action diminishes profits but even if it merely isn't obvious why it increases the bottom line-earnings per share-the Street doesn't like it.
Here are some pretty symptomatic articles in this genre of complaints.
"That glowing new bestseller, that Friday stock bump, that rosy Christmas outlook—they can’t hide that after 20 years, the company still hasn’t managed to turn a profit. Daniel Gross on whether it ever will."
http://www.thedailybeast.com/articles/2013/10/25/amazon-stock-may-be-up-but-the-company-still-doesn-t-make-any-money.html
Here they note that 'Amazon never makes a profit but no one cares.'
http://www.investopedia.com/stock-analysis/031414/amazon-never-makes-money-no-one-cares-amzn-aapl-wag-azo.aspx
Forbes, seriously was impatient here-conservatives never have patience for such foolishness.
Here it tells you why Amazon is such a lousy business.
http://www.forbes.com/sites/gregsatell/2013/08/15/why-amazon-is-a-lousy-business/
I think I can explain the bias against AMZN in a short version: basically it cares about customer service so it can't be doing a good job in the bottom line: customer service shrinks the bottom line.
Forbes put this explicitly:
"As a consumer, I love Amazon. During my years overseas it was an important lifeline for me, reliably sending me books and videos to some pretty out of the way places."
"When I moved back to the US, I almost immediately signed up for Amazon Prime and now not only get free delivery, but can stream movies and TV shows too."
"Besides being the greatest e-commerce site on the planet, Amazon also brings impressive innovations to market, such as Amazon Web Services and the Kindle tablet. Undoubtedly, Amazon is a great company."
"Unfortunately, it’s not a great business. According to Yahoo Finance, the company earned only a slim 1% operating margin during the last 2 years and a not particularly impressive 4% margin in 2010. While there’s more to a business than just the bottom line, those are worrying numbers."
http://www.forbes.com/sites/gregsatell/2013/08/15/why-amazon-is-a-lousy-business/
The writer manages to take some of the edge of this by personalizing it: he's an AMZN customer too and he enjoys it. But clearly while he may feel our pain, customer service is the trouble and it needs to stop.
As recently as January the analysts were still at it: Will Amazon ever show a profit?
Customer service! The very idea! They should learn from Microsoft and Google.
http://lastmenandovermen.blogspot.com/2015/07/speaking-of-labor-regulations-in-uber.html
When Google screws you over you simply never hear from them again-try being a publisher.
So how does Bezos get away with it? He tries to explain it to Business Insider"
http://www.businessinsider.com/jeff-bezos-on-profits-2014-12
Well whatever it is something is clearly working for Bezos. In 2013 and 2014 it seemed the company may have been in trouble as the stock kept getting whacked by the tune of 8% to 10% every earnings day-though it would then slide back up to it's previous level before the earnings haircut.
In early December the stock was rocked for the 4th straight time from $312 to 284. But soon it was above $312 and the stock finsihed today at over $480. Then after the bell they truly shocked the Street: they turned a profit.
How do you treat customers better than something on the bottom of your shoe and live to tell about it? Maybe ask Bezos:
"Amazon shares spiked on Thursday after the company easily topped quarterly earnings and revenue estimates.
"The online retailer posted second-quarter profit of 19 cents per share on $23.18 billion in revenue. Its sales were more than $300 million higher than the highest of 36 estimates from analysts polled by Reuters.
"Wall Street expected Amazon.com to deliver a quarterly loss of 14 cents per share on $22.39 billion in revenue, according to consensus estimates from Thomson Reuters."
http://www.cnbc.com/2015/07/23/amazon-earnings-19-cents-per-share-vs-expected-loss-of-14-cents-a-share.html
Now the stock is up 18% in the after hours.
http://data.cnbc.com/quotes/AMZN
I have to say it's a little bittersweet as I had considered buying a $500 call for earnings today but I was already in 250 calls for Bank of America with a $18.60 strike. I had hoped to take profits on that but BAC dropped hard because of a management shakeup.
We'll see if I should have vacated this position tomorrow. My guess is that it was probably overdone-it might even be a good shakeup as maybe Brian Moynihan is trying to get his arms around the problem BAC has had with the Fed's stress tests.
But I could have made a lot had I gone for AMZN-though I also can for BAC if it goes up tomorrow. Oh well. How often do you hear I could have made a lot of money when discussing the market?
This conversation never really stopped. It's the kind of conversation that all Internet companies used to have back in the late 90s. AMZN never really outgrew it.
In 2013 and 2014, the narrative was that the Street was fed up with Jeff Bezos. They wanted to see actual profits and they want to see it now. The trouble with AMZN in their mind is that while it does many things very well it does a whole lot of other things that seem to have no bearing on profits.
That's one of the prejudices of the analysts. If it doesn't turn a profit a company shouldn't do it. Ok this might be understandable if you can show that this action diminishes profits but even if it merely isn't obvious why it increases the bottom line-earnings per share-the Street doesn't like it.
Here are some pretty symptomatic articles in this genre of complaints.
"That glowing new bestseller, that Friday stock bump, that rosy Christmas outlook—they can’t hide that after 20 years, the company still hasn’t managed to turn a profit. Daniel Gross on whether it ever will."
http://www.thedailybeast.com/articles/2013/10/25/amazon-stock-may-be-up-but-the-company-still-doesn-t-make-any-money.html
Here they note that 'Amazon never makes a profit but no one cares.'
http://www.investopedia.com/stock-analysis/031414/amazon-never-makes-money-no-one-cares-amzn-aapl-wag-azo.aspx
Forbes, seriously was impatient here-conservatives never have patience for such foolishness.
Here it tells you why Amazon is such a lousy business.
http://www.forbes.com/sites/gregsatell/2013/08/15/why-amazon-is-a-lousy-business/
I think I can explain the bias against AMZN in a short version: basically it cares about customer service so it can't be doing a good job in the bottom line: customer service shrinks the bottom line.
Forbes put this explicitly:
"As a consumer, I love Amazon. During my years overseas it was an important lifeline for me, reliably sending me books and videos to some pretty out of the way places."
"When I moved back to the US, I almost immediately signed up for Amazon Prime and now not only get free delivery, but can stream movies and TV shows too."
"Besides being the greatest e-commerce site on the planet, Amazon also brings impressive innovations to market, such as Amazon Web Services and the Kindle tablet. Undoubtedly, Amazon is a great company."
"Unfortunately, it’s not a great business. According to Yahoo Finance, the company earned only a slim 1% operating margin during the last 2 years and a not particularly impressive 4% margin in 2010. While there’s more to a business than just the bottom line, those are worrying numbers."
http://www.forbes.com/sites/gregsatell/2013/08/15/why-amazon-is-a-lousy-business/
The writer manages to take some of the edge of this by personalizing it: he's an AMZN customer too and he enjoys it. But clearly while he may feel our pain, customer service is the trouble and it needs to stop.
As recently as January the analysts were still at it: Will Amazon ever show a profit?
Customer service! The very idea! They should learn from Microsoft and Google.
http://lastmenandovermen.blogspot.com/2015/07/speaking-of-labor-regulations-in-uber.html
When Google screws you over you simply never hear from them again-try being a publisher.
So how does Bezos get away with it? He tries to explain it to Business Insider"
http://www.businessinsider.com/jeff-bezos-on-profits-2014-12
Well whatever it is something is clearly working for Bezos. In 2013 and 2014 it seemed the company may have been in trouble as the stock kept getting whacked by the tune of 8% to 10% every earnings day-though it would then slide back up to it's previous level before the earnings haircut.
In early December the stock was rocked for the 4th straight time from $312 to 284. But soon it was above $312 and the stock finsihed today at over $480. Then after the bell they truly shocked the Street: they turned a profit.
How do you treat customers better than something on the bottom of your shoe and live to tell about it? Maybe ask Bezos:
"Amazon shares spiked on Thursday after the company easily topped quarterly earnings and revenue estimates.
"The online retailer posted second-quarter profit of 19 cents per share on $23.18 billion in revenue. Its sales were more than $300 million higher than the highest of 36 estimates from analysts polled by Reuters.
"Wall Street expected Amazon.com to deliver a quarterly loss of 14 cents per share on $22.39 billion in revenue, according to consensus estimates from Thomson Reuters."
http://www.cnbc.com/2015/07/23/amazon-earnings-19-cents-per-share-vs-expected-loss-of-14-cents-a-share.html
Now the stock is up 18% in the after hours.
http://data.cnbc.com/quotes/AMZN
I have to say it's a little bittersweet as I had considered buying a $500 call for earnings today but I was already in 250 calls for Bank of America with a $18.60 strike. I had hoped to take profits on that but BAC dropped hard because of a management shakeup.
We'll see if I should have vacated this position tomorrow. My guess is that it was probably overdone-it might even be a good shakeup as maybe Brian Moynihan is trying to get his arms around the problem BAC has had with the Fed's stress tests.
But I could have made a lot had I gone for AMZN-though I also can for BAC if it goes up tomorrow. Oh well. How often do you hear I could have made a lot of money when discussing the market?
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