4 ms·

> I'm guessing over $200B of Amazon's $475B valuation is from AWS and Amazon's subsidiaries. They have [small] stakes in some companies too. To be fair, the sub

> I'm guessing over $200B of Amazon's $475B valuation is from AWS and Amazon's subsidiaries. They have [small] stakes in some companies too. To be fair, the subsidiaries are peanuts^ (let's be generous and give them a combined value of $10B). I just believe (rightly or wrongly) that Amazon's customers are more price sensitive that is commonly believed and the merry-go-round of constant reinvestment isn't going to be something that can be stopped for that reason. I always thought Amazon was fairly valued around $300-400/share and pretty much dumped all my stock in Amazon accordingly. Maybe I'm wrong but I have a suspicion I'm not. Look at Alphabet's financials vs. Googles and I think you'll find one of these seems just a much more reasonable valuation than the other at ~$1000/share.

skinnymuch 9y ago
> I just believe (rightly or wrongly) that Amazon's customers are more price sensitive that is commonly believed and the merry-go-round of constant reinvestment isn't going to be something that can be stopped for that reason. Maybe. But the 70M prime members whose numbers just keep going up and we will see that number break 100M at some point. They don't account for a majority of Amazon's revenue but Amazon is doing over $6B in subscription revenue alone on them right now. Those members aren't as price conscious. And there's many people who aren't willing to pay the $80-100 yearly fee but still use Amazon as a default like Prime members. Those two groups combined most likely account for a majority of Amazon's ecommerce revenue and profit. > I always thought Amazon was fairly valued around $300-400/share But you quoted my part saying AWS itself (and technically I included the subsidiaries) is worth that much in share value itself/themselves. At $300/share you're talking about just a $150B market cap. At that point, whose values are you killing off? Amazon retail, value of all the prime members, AWS, Alexa/Kindle/Fire ecosystem, subsidiaries? Their PE would be at 60 at that point. People once balked at FB's PE for being in the hundreds. Now it's at a cool 40. PE of 60 is about double Google's. Who coincidentally have been going harder in recent years on cutting spending with their latest CFO and continue with trying to raise profits of their golden goose. Putting that into context, your thinking of $300-400 a share is too low. AWS has a lot of competition. But it's currently still growing and profit margins are huge. Most business don't seem to mind AWS's high prices. Amazon is still growing too. They bought Souq, the Amazon of Saudi/ME. They are investing billions to fight for India. Google I believe has already won south east Asia. Their retail/ecommerce revenue alone is around $100B. Overall, they are going to top $150B this year. Without AWS which is their primary profit machine right now, they are still at $135B+ in revenue. Don't you think if they wanted to, they'd be able to eek out a few billion in profit from that remaining $100B+ in revenue if they decided to go that way? That would get their PE below 100. I will note I don't think PE matters that much for Amazon right now. Just look at Netflix's or Salesforce's PE ratios now and in recent years. I agree, Google's profitability much like Facebook is extraordinary. But they are the two main internet advertising companies. Apple is even more insane, but they only intersect in certain aspects. Finally, Google and Amazon had around the same revenue at the beginning of this decade. By the end of it, Amazon will be double (or just about) Google's revenue. Comparing them isn't as simple as apples to apples.
- fweespeech 9y ago
  > Their retail/ecommerce revenue alone is around $100B. Overall, they are going to top $150B this year. Without AWS which is their primary profit machine right now, they are still at $135B+ in revenue. Don't you think if they wanted to, they'd be able to eek out a few billion in profit from that remaining $100B+ in revenue if they decided to go that way? That would get their PE below 100. Amazon can't actually compete with us on price without selling below their costs. That is the reason we are still alive despite Amazon moving into our market. They can't raise prices _at all_. Their ability to do so _entirely depends_ on them becoming more efficient. I suspect they can't become substantially more efficient on the retail side than they already are.
  - skinnymuch 9y ago
    Can they really not? I guess it really comes down to if people will shop at Amazon much less or at all if they raise prices by a few percent or don't decrease prices over the next few years (just an example). Both achieving the same thing. Not saying for all products, just some potentially. I personally don't think they'd take that much of a hit. But i could be convinced by otherwise.

skinnymuch 9y ago

> I just believe (rightly or wrongly) that Amazon's customers are more price sensitive that is commonly believed and the merry-go-round of constant reinvestment isn't going to be something that can be stopped for that reason. Maybe. But the 70M prime members whose numbers just keep going up and we will see that number break 100M at some point. They don't account for a majority of Amazon's revenue but Amazon is doing over $6B in subscription revenue alone on them right now. Those members aren't as price conscious. And there's many people who aren't willing to pay the $80-100 yearly fee but still use Amazon as a default like Prime members. Those two groups combined most likely account for a majority of Amazon's ecommerce revenue and profit. > I always thought Amazon was fairly valued around $300-400/share But you quoted my part saying AWS itself (and technically I included the subsidiaries) is worth that much in share value itself/themselves. At $300/share you're talking about just a $150B market cap. At that point, whose values are you killing off? Amazon retail, value of all the prime members, AWS, Alexa/Kindle/Fire ecosystem, subsidiaries? Their PE would be at 60 at that point. People once balked at FB's PE for being in the hundreds. Now it's at a cool 40. PE of 60 is about double Google's. Who coincidentally have been going harder in recent years on cutting spending with their latest CFO and continue with trying to raise profits of their golden goose. Putting that into context, your thinking of $300-400 a share is too low. AWS has a lot of competition. But it's currently still growing and profit margins are huge. Most business don't seem to mind AWS's high prices. Amazon is still growing too. They bought Souq, the Amazon of Saudi/ME. They are investing billions to fight for India. Google I believe has already won south east Asia. Their retail/ecommerce revenue alone is around $100B. Overall, they are going to top $150B this year. Without AWS which is their primary profit machine right now, they are still at $135B+ in revenue. Don't you think if they wanted to, they'd be able to eek out a few billion in profit from that remaining $100B+ in revenue if they decided to go that way? That would get their PE below 100. I will note I don't think PE matters that much for Amazon right now. Just look at Netflix's or Salesforce's PE ratios now and in recent years. I agree, Google's profitability much like Facebook is extraordinary. But they are the two main internet advertising companies. Apple is even more insane, but they only intersect in certain aspects. Finally, Google and Amazon had around the same revenue at the beginning of this decade. By the end of it, Amazon will be double (or just about) Google's revenue. Comparing them isn't as simple as apples to apples.

fweespeech 9y ago
> Their retail/ecommerce revenue alone is around $100B. Overall, they are going to top $150B this year. Without AWS which is their primary profit machine right now, they are still at $135B+ in revenue. Don't you think if they wanted to, they'd be able to eek out a few billion in profit from that remaining $100B+ in revenue if they decided to go that way? That would get their PE below 100. Amazon can't actually compete with us on price without selling below their costs. That is the reason we are still alive despite Amazon moving into our market. They can't raise prices _at all_. Their ability to do so _entirely depends_ on them becoming more efficient. I suspect they can't become substantially more efficient on the retail side than they already are.
- skinnymuch 9y ago
  Can they really not? I guess it really comes down to if people will shop at Amazon much less or at all if they raise prices by a few percent or don't decrease prices over the next few years (just an example). Both achieving the same thing. Not saying for all products, just some potentially. I personally don't think they'd take that much of a hit. But i could be convinced by otherwise.