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You can justify Apple's valuation through cash flow. You can't do it with Amazon. However it has always traded at a high valuation. Lets suppose it becomes the

You can justify Apple's valuation through cash flow. You can't do it with Amazon. However it has always traded at a high valuation. Lets suppose it becomes the size of walmart which close ~500 bil in revenue. On the retail end their margins aren't really any better. So that is ~300 billion dollar business. That would mean AWS + prime video/music + amazon ads are worth 700 billions?

Talyen42 8y ago
If Amazon's growth rate decelerates by 1% each year for 10 years, they'd end up with ~$1.7 trillion in revenue, more than 3x walmart. That's more in line with what Amazon shareholders are expecting with the current valuation (i'm not one of them)
- samfisher83 8y ago
  95% of American's went into walmart. https://www.cnbc.com/2017/04/12/nearly-every-american-spent-money-at-wal-mart-last-year.html https://www.cnbc.com/2017/04/12/nearly-every-american-spent-... At some point you will start to asymptote out. 1.7 Trillion is more than walmart+Target+3 of 4 big box retailers.
  - zild3d 8y ago
    > 95% of American's went into walmart. That seems very hard to believe. Trying to find more info on where those numbers came from, appears the NPD Group looked at 4 million receipts? How do the segments that would avoid walmart not make up more than 5% of the US population? Those who are morally/politically against walmart, the very wealthy (likely have someone go for them, or don't shop at walmart), physically incapable, or not physically near (e.g. young people in cities with no car)
    - jedberg 8y ago
      I think you're vastly overestimating the size of those groups.
    - Skunkleton 8y ago
      I fall into the "against" walmart camp. I have still been to walmart in the last 12 months.
    - deleted 8y ago
      [deleted]
mywittyname 8y ago
I think AWS alone justifies the price. They are uniquely positioned to capture a huge chunk of internet traffic for enterprises. They are constantly releasing new features on AWS that greatly simplify the building huge projects. As time goes on, I think Amazon will have a huge number of major companies totally locked into AWS. A quick google search show Apple had a profit of $11.5B last quarter while AWS alone brought in a net income of $1.4B, which is an increase of like 80% YoY. If they can maintain that level of growth for four years, then AWS alone will be be as profitable as all of Apple is now.
- zip1234 8y ago
  They have a lot of competitors that have products as good or better. Competition should squeeze their profits considerably.
  - mywittyname 8y ago
    Amazon is much more willing to make deals to protect IP than Google or Microsoft have been (in my experience). Google will flat out admit that they will use your company data to improve their product offerings (which are available to your competitors) and will not acquiesce on that point.
  - adventured 8y ago
    They've been losing market share for years, to Azure and Google. Their profits haven't gotten squeezed. Their operating margins continue to be robust as ever. Most of the services AWS offers, are software services that have extreme margins. Competition isn't going to materially cut into that (which is why after all of these years of fierce competition, it hasn't).
    - jedberg 8y ago
      > They've been losing market share for years, to Azure and Google. Most analysts would disagree with you, as would I. They haven't been losing market share to anyone -- the market is just growing around them. There is very little overlap between Azure and AWS customers. MS has been knocking it out of the park growing Azure, but it's mostly been customers who would have been doing Windows in the datacenter if not for Azure. They aren't capturing much of the non-Windows market, other than as ancillary services that go along with Windows services that get moved to Azure. Google is competing directly with AWS, and what they offer is technically superior, but they're still terrible at selling to the Enterprise, which is where all the money is. Sure, Google is getting a lot of small shops with a few developers, but all the real money is going to AWS, who is getting really good at selling to the enterprise, a hell of a lot faster than Google is.
deleted 8y ago
[deleted]
Applejinx 8y ago
The valuation doesn't have to do with handling as much cash as WalMart. The valuation has to do with this idea that Amazon will inevitably kill everything else including WalMart and end up the only way anybody can buy things or do business. It sure as hell hasn't built this valuation on the back of dividends to shareholders. You are taking a ride on a collective fantasy that there can exist a company that kills all other companies and somehow inherits their business without obliterating society as we know it. Or, possibly, that there can be a cancer so big that it becomes the person and takes over doing everything that they do? It's definitely a fantasy. Not Amazon's intentions: they're absolutely out to do this wherever possible, and it colors the attitude of Amazonians and dovetails with the political reality of the USA as it currently stands. The fantasy part is that it doesn't end in tears. Eventually Amazon must stop growing, if for no other reason than society will collapse and there will be no more customers for them to service, as there won't be jobs at Amazon to support 'em and government welfare will not be able to give the jobless people enough money to continue to buy things from Amazon. That's already beginning to happen, but until then—there's a trillion dollar valuation, and the world of capital cries 'play on!'. Or you could try and convince Amazonians NOT to kill everything else? But I don't think that'll get far: it's their culture and, as I said, that's the only reason for the valuation. People assume Amazon will continue to win.
- irrational 8y ago
  Cue the WALL-E movie.
adventured 8y ago
AWS and their ad business are projected to generate $31 billion in operating income for fiscal 2021. Those two businesses are worth a likely $600b to $1t depending on how aggressive you want to be on the multiple. That's three to four years out, however that's how the market typically treats Amazon (forward expectations of growth, not the prior 12 months earnings). They're richly valued today, no question, and it's quite plausible they'll actually grow into their current valuation in time (the market cap today pulls at least five years of growth forward to the present imo; who knows if AWS and advertising will keep going as anticipated). The retail business will end up being by far the least valuable part of the Amazon empire. Whenever the day comes that these pieces are split off, particularly AWS, the retail business won't end up being worth more than Walmart.
cm2187 8y ago
I'd say the bias is the other way. Apple is a one trick pony that is only growing through raising prices, in a market where their value added vs competition is becoming very thin. Not convinced their margins are sustainable in the long term. Amazon on the other hand, between cloud and online retail, not only still has room to grow, and is building a moat around their business through the sheer scale of their infrastructure (logistics + datacenters). Both are fairly pro-cyclical though (retail & luxury products). If anyone thinks the peak of the cycle is close...
- coldtea 8y ago
  >I'd say the bias is the other way. Apple is a one trick pony that is only growing through raising prices For a company that started from computers, moved to media players, added music stores, added smartphones, added app stores, added tablets, add cloud services, added watches, and managed even the smallest of those categories (e.g. watches) to be the size of a Fortune 500 company (4-6 billion) and growing, it's rich calling it an "one trick pony".
  - bodas 8y ago
    Sadly, that man is dead. The accountant they have running things now is very good at making money, but not very good at creating new products. They are already selling $999 phones, it's hard to see how he can squeeze any more money out of the iPhone.
    - social_quotient 8y ago
      I think it’s why they are attacking the entire vertical for where that 999 goes https://www.eetimes.com/document.asp?doc_id=1333633 https://www.eetimes.com/document.asp?doc_id=1333633
    - samfisher83 8y ago
      They can charge 1100 for the phone. Their revenues went up not because they are selling more phones, but Average Selling Price went up. If people are willing to pay 1k why not 1.1 or 1.2. At some point people will stop, but you can find the price point that maximizes profit.

Talyen42 8y ago

If Amazon's growth rate decelerates by 1% each year for 10 years, they'd end up with ~$1.7 trillion in revenue, more than 3x walmart. That's more in line with what Amazon shareholders are expecting with the current valuation (i'm not one of them)

samfisher83 8y ago
95% of American's went into walmart. https://www.cnbc.com/2017/04/12/nearly-every-american-spent-money-at-wal-mart-last-year.html https://www.cnbc.com/2017/04/12/nearly-every-american-spent-... At some point you will start to asymptote out. 1.7 Trillion is more than walmart+Target+3 of 4 big box retailers.
- zild3d 8y ago
  > 95% of American's went into walmart. That seems very hard to believe. Trying to find more info on where those numbers came from, appears the NPD Group looked at 4 million receipts? How do the segments that would avoid walmart not make up more than 5% of the US population? Those who are morally/politically against walmart, the very wealthy (likely have someone go for them, or don't shop at walmart), physically incapable, or not physically near (e.g. young people in cities with no car)
  - jedberg 8y ago
    I think you're vastly overestimating the size of those groups.
  - Skunkleton 8y ago
    I fall into the "against" walmart camp. I have still been to walmart in the last 12 months.
  - deleted 8y ago
    [deleted]

mywittyname 8y ago

I think AWS alone justifies the price. They are uniquely positioned to capture a huge chunk of internet traffic for enterprises. They are constantly releasing new features on AWS that greatly simplify the building huge projects. As time goes on, I think Amazon will have a huge number of major companies totally locked into AWS. A quick google search show Apple had a profit of $11.5B last quarter while AWS alone brought in a net income of $1.4B, which is an increase of like 80% YoY. If they can maintain that level of growth for four years, then AWS alone will be be as profitable as all of Apple is now.

zip1234 8y ago
They have a lot of competitors that have products as good or better. Competition should squeeze their profits considerably.
- mywittyname 8y ago
  Amazon is much more willing to make deals to protect IP than Google or Microsoft have been (in my experience). Google will flat out admit that they will use your company data to improve their product offerings (which are available to your competitors) and will not acquiesce on that point.
- adventured 8y ago
  They've been losing market share for years, to Azure and Google. Their profits haven't gotten squeezed. Their operating margins continue to be robust as ever. Most of the services AWS offers, are software services that have extreme margins. Competition isn't going to materially cut into that (which is why after all of these years of fierce competition, it hasn't).
  - jedberg 8y ago
    > They've been losing market share for years, to Azure and Google. Most analysts would disagree with you, as would I. They haven't been losing market share to anyone -- the market is just growing around them. There is very little overlap between Azure and AWS customers. MS has been knocking it out of the park growing Azure, but it's mostly been customers who would have been doing Windows in the datacenter if not for Azure. They aren't capturing much of the non-Windows market, other than as ancillary services that go along with Windows services that get moved to Azure. Google is competing directly with AWS, and what they offer is technically superior, but they're still terrible at selling to the Enterprise, which is where all the money is. Sure, Google is getting a lot of small shops with a few developers, but all the real money is going to AWS, who is getting really good at selling to the enterprise, a hell of a lot faster than Google is.

deleted 8y ago

[deleted]

Applejinx 8y ago

The valuation doesn't have to do with handling as much cash as WalMart. The valuation has to do with this idea that Amazon will inevitably kill everything else including WalMart and end up the only way anybody can buy things or do business. It sure as hell hasn't built this valuation on the back of dividends to shareholders. You are taking a ride on a collective fantasy that there can exist a company that kills all other companies and somehow inherits their business without obliterating society as we know it. Or, possibly, that there can be a cancer so big that it becomes the person and takes over doing everything that they do? It's definitely a fantasy. Not Amazon's intentions: they're absolutely out to do this wherever possible, and it colors the attitude of Amazonians and dovetails with the political reality of the USA as it currently stands. The fantasy part is that it doesn't end in tears. Eventually Amazon must stop growing, if for no other reason than society will collapse and there will be no more customers for them to service, as there won't be jobs at Amazon to support 'em and government welfare will not be able to give the jobless people enough money to continue to buy things from Amazon. That's already beginning to happen, but until then—there's a trillion dollar valuation, and the world of capital cries 'play on!'. Or you could try and convince Amazonians NOT to kill everything else? But I don't think that'll get far: it's their culture and, as I said, that's the only reason for the valuation. People assume Amazon will continue to win.

irrational 8y ago
Cue the WALL-E movie.

adventured 8y ago

AWS and their ad business are projected to generate $31 billion in operating income for fiscal 2021. Those two businesses are worth a likely $600b to $1t depending on how aggressive you want to be on the multiple. That's three to four years out, however that's how the market typically treats Amazon (forward expectations of growth, not the prior 12 months earnings). They're richly valued today, no question, and it's quite plausible they'll actually grow into their current valuation in time (the market cap today pulls at least five years of growth forward to the present imo; who knows if AWS and advertising will keep going as anticipated). The retail business will end up being by far the least valuable part of the Amazon empire. Whenever the day comes that these pieces are split off, particularly AWS, the retail business won't end up being worth more than Walmart.

cm2187 8y ago

I'd say the bias is the other way. Apple is a one trick pony that is only growing through raising prices, in a market where their value added vs competition is becoming very thin. Not convinced their margins are sustainable in the long term. Amazon on the other hand, between cloud and online retail, not only still has room to grow, and is building a moat around their business through the sheer scale of their infrastructure (logistics + datacenters). Both are fairly pro-cyclical though (retail & luxury products). If anyone thinks the peak of the cycle is close...

coldtea 8y ago
>I'd say the bias is the other way. Apple is a one trick pony that is only growing through raising prices For a company that started from computers, moved to media players, added music stores, added smartphones, added app stores, added tablets, add cloud services, added watches, and managed even the smallest of those categories (e.g. watches) to be the size of a Fortune 500 company (4-6 billion) and growing, it's rich calling it an "one trick pony".
- bodas 8y ago
  Sadly, that man is dead. The accountant they have running things now is very good at making money, but not very good at creating new products. They are already selling $999 phones, it's hard to see how he can squeeze any more money out of the iPhone.
  - social_quotient 8y ago
    I think it’s why they are attacking the entire vertical for where that 999 goes https://www.eetimes.com/document.asp?doc_id=1333633 https://www.eetimes.com/document.asp?doc_id=1333633
  - samfisher83 8y ago
    They can charge 1100 for the phone. Their revenues went up not because they are selling more phones, but Average Selling Price went up. If people are willing to pay 1k why not 1.1 or 1.2. At some point people will stop, but you can find the price point that maximizes profit.