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It would take way more than 300 years of profits at the current level to justify the stock price. That's crazy high. Even if AMZN could 10x their earnings ove

It would take way more than 300 years of profits at the current level to justify the stock price. That's crazy high. Even if AMZN could 10x their earnings overnight by stopping expansion or something, they'd still have a 30x - meaning way more than 30 years of future profits at this level. Either that, or they'd still have to grow that much. Stocks are in a clear bubble. Snap, AMZN, Tesla, and also BTC are stupid, and the world economy needs a correction just to remind people to do their homework. And it's pretty rational to ask if there is much upside to Amazon - because there's a whole lot of downside risk now as well if financial markets decide that 300 is a 'dumb' multiple.

y_u_no_rust 9y ago
> Snap, AMZN, Tesla, and also BTC Of those four I can only see AMZN and likely Tesla lasting the next 10-20
adventured 9y ago
Amazon won't have a hard time eventually generating $20+ billion in net income (assuming very low net income margins of 5%). AWS by itself will hit $10 billion in operating income in three to four years. That business accounts for at least half of Amazon's present market cap. If AWS were a stand-alone publicly traded company, it'd have at least a $250 billion market cap right now. The market is clearly anticipating Amazon is going to get a lot larger yet. They're still growing at ~25% annually (minus Wholefoods), despite approaching $200 billion in sales. There's also no question that it's extremely richly valued here no matter what their growth is over the next five or so years.
- alexasmyths 9y ago
  They'll grow for a while yet but I don't see how they'll keep doing that, moreover, I don't see how they'll ever get to the margins they need. Cloud services are also a competitive business and margins I think will erode eventually.
  - adventured 9y ago
    Walmart is at $425-$450 billion in traditional retail sales ($485b total), it very clearly can be done. Ecommerce will double over the next ten years in the US. Out of the trillion dollars in that ecommerce expansion, Amazon will very likely get at least a quarter of it. If you slow Amazon's growth down to something like 9%-12% avg per year over the next 10 years - which is very reasonable based on where they're at now - they're over half a trillion in sales at the end of that. On a modest decline from the present rate of growth, they'll hit $300+ billion in sales in just three years. AWS should easily be at a $9b operating income annualized run-rate, at that point. The common proclaim for years now, has been that there would be no margins in cloud services. AWS has always proven that wrong, all the way back. There's no reason to believe after 11 years, the margins are suddenly going to disappear. If the fierce AWS / Azure / GC competition the last five years didn't squeeze those margins out yet, then what would? It's more likely that the AWS margins will hold as they add more specialized services that are difficult for basic / smaller competitors to replicate (unlike eg standard compute or database services).
AznHisoka 9y ago
Except stock price isnt intrinsically related to profits at all. So Amazon is $1100. Great. Does that entitle you to x% of the profits? nope. We just believe that stock prices should reflect profits but its just a false fabrication. Price simply reflects demand from stock buyers. as a thought experiment, Lets suppose that everyone on earth is forced to invest 10 percent of their salary in their 401k and it has to be in equities. And they cant take it out until they are 90 years old. Stock prices would probably inflate 5-10 times current prices. Amazon would be 10 times "overvalued" in relation to profits. Would you not buy becauss of this? Of course not, Because people would continually invest in stocks and much fewer people are cashing out.

y_u_no_rust 9y ago

> Snap, AMZN, Tesla, and also BTC Of those four I can only see AMZN and likely Tesla lasting the next 10-20

adventured 9y ago

Amazon won't have a hard time eventually generating $20+ billion in net income (assuming very low net income margins of 5%). AWS by itself will hit $10 billion in operating income in three to four years. That business accounts for at least half of Amazon's present market cap. If AWS were a stand-alone publicly traded company, it'd have at least a $250 billion market cap right now. The market is clearly anticipating Amazon is going to get a lot larger yet. They're still growing at ~25% annually (minus Wholefoods), despite approaching $200 billion in sales. There's also no question that it's extremely richly valued here no matter what their growth is over the next five or so years.

alexasmyths 9y ago
They'll grow for a while yet but I don't see how they'll keep doing that, moreover, I don't see how they'll ever get to the margins they need. Cloud services are also a competitive business and margins I think will erode eventually.
- adventured 9y ago
  Walmart is at $425-$450 billion in traditional retail sales ($485b total), it very clearly can be done. Ecommerce will double over the next ten years in the US. Out of the trillion dollars in that ecommerce expansion, Amazon will very likely get at least a quarter of it. If you slow Amazon's growth down to something like 9%-12% avg per year over the next 10 years - which is very reasonable based on where they're at now - they're over half a trillion in sales at the end of that. On a modest decline from the present rate of growth, they'll hit $300+ billion in sales in just three years. AWS should easily be at a $9b operating income annualized run-rate, at that point. The common proclaim for years now, has been that there would be no margins in cloud services. AWS has always proven that wrong, all the way back. There's no reason to believe after 11 years, the margins are suddenly going to disappear. If the fierce AWS / Azure / GC competition the last five years didn't squeeze those margins out yet, then what would? It's more likely that the AWS margins will hold as they add more specialized services that are difficult for basic / smaller competitors to replicate (unlike eg standard compute or database services).

AznHisoka 9y ago

Except stock price isnt intrinsically related to profits at all. So Amazon is $1100. Great. Does that entitle you to x% of the profits? nope. We just believe that stock prices should reflect profits but its just a false fabrication. Price simply reflects demand from stock buyers. as a thought experiment, Lets suppose that everyone on earth is forced to invest 10 percent of their salary in their 401k and it has to be in equities. And they cant take it out until they are 90 years old. Stock prices would probably inflate 5-10 times current prices. Amazon would be 10 times "overvalued" in relation to profits. Would you not buy becauss of this? Of course not, Because people would continually invest in stocks and much fewer people are cashing out.