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You're missing the point here. Google's main business, selling ads, and Amazon's current main business, online retail, are two completely different markets. You

by laluser 14y ago

You're missing the point here. Google's main business, selling ads, and Amazon's current main business, online retail, are two completely different markets. You're essentially comparing apples to oranges. The margins are lower in the space that Amazon is competing in, it doesn't make sense to compare two completely different companies.

w0utert 14y ago
Sure the margins are lower in online retail, but even then Amazon is performing abysmally, and the trend in almost all their numbers is downwards. The only reason they are still around in the first place, is sheer size. Smaller retailers would never survive on the profit margins Amazon is producing. The thing that sticks out most from their earnings release is that the trend is clearly downward. The profit margins and net cash flow are sinking, while operating costs, number of employees, etc are rising. Added to that, their market cap/stock valuation is truly insane, which IMO is a ticking time bomb. What this all means is that Amazon is going to get in a shitload of trouble somewhere down the road. Remember that they only made about $5 billion in profit over their complete lifetime, of which only about $1.5 billion is left after deducting losses, so in terms of cash Amazon is more or less on life support of their investors. All it takes is some relatively minor event (more focused competition, lower consumer spending, some kind of bad media attention) and their stock will tank, and the whole constellation could go down like a house of cards. No matter how much you like Amazon and its services, it's hardly an example of a solid business if you ask me.
- Retric 14y ago
  What your missing is they don't pre pay for there inventory. So while revenue vs profit might make it seem like they would quickly get into trouble a 10% drop in retail sales with far less issues than a software company operating on 1% margins.
  - w0utert 14y ago
    They might not pre-pay for the inventory, but they still have fixed costs, and they are rising, they have over 50k employees now. They _need_ to sell at huge volumes with the profit margins they are taking, otherwise they will bleed money. Some day, the fairy tale of 3000+ P/E and years of making next to no profits or even losses will be over and the stock will tank. Amazon will have a huge problem attracting funding to cover their fixed costs, they will have to fire lots and lots of employees at the expense of service and marketshare, and basically show us what the .com bubble 2.0 looks like.
    - pestaa 14y ago
      This prediction is insightful, but still just a prediction. However, if you state it like it's going to happen tomorrow, it is also spreading FUD.
- zaidf 14y ago
  All it takes is some relatively minor event (more focused competition, lower consumer spending, some kind of bad media attention) and their stock will tank, and the whole constellation could go down like a house of cards. So if all it will take is a relatively minor event, why hasn't it already happened yet for a company that has been around over 15 years?
  - w0utert 14y ago
    I'd say 'because the market still has confidence in Amazon', which is reflected by their market cap. While market cap has no relation whatsoever to the profitability of a company, it does allow Amazon to keep investing in expanding into all the directions they are expanding in. At current valuations, they only have to add ~5M shares (on a current total of ~450M outstanding) to raise around ~$1B. This is not a free ride though, they _will_ have to be able to jack up their profits somewhere in the future, otherwise the stock will sink and they will have a hard time to keep up their strategy of expansion. I'm quite surprised they have been able to keep up this game for so long myself, but it's not totally crazy. Online shopping is has been growing like crazy for since Amazon started, the market today is probably at least a 100 times larger than ~10 years ago. Some day though, growth will start to level off, and looking at Amazon's earnings releases over the last 2 years or so, it seems like we're almost there. It's going to be very interesting to see what happens to Amazon when they cannot keep growing any bigger.
    - Evbn 14y ago
      Stock price has 0 effect on the sustainability of Amazon as a business.
    - zaidf 14y ago
      I guess I don't see your implied meaning of "relatively minor." If the market has had confidence in amazon for so many years, then wouldn't any event that causes them to lose confidence be considered the opposite of minor?

by laluser 14y ago

w0utert 14y ago

Sure the margins are lower in online retail, but even then Amazon is performing abysmally, and the trend in almost all their numbers is downwards. The only reason they are still around in the first place, is sheer size. Smaller retailers would never survive on the profit margins Amazon is producing. The thing that sticks out most from their earnings release is that the trend is clearly downward. The profit margins and net cash flow are sinking, while operating costs, number of employees, etc are rising. Added to that, their market cap/stock valuation is truly insane, which IMO is a ticking time bomb. What this all means is that Amazon is going to get in a shitload of trouble somewhere down the road. Remember that they only made about $5 billion in profit over their complete lifetime, of which only about $1.5 billion is left after deducting losses, so in terms of cash Amazon is more or less on life support of their investors. All it takes is some relatively minor event (more focused competition, lower consumer spending, some kind of bad media attention) and their stock will tank, and the whole constellation could go down like a house of cards. No matter how much you like Amazon and its services, it's hardly an example of a solid business if you ask me.

Retric 14y ago
What your missing is they don't pre pay for there inventory. So while revenue vs profit might make it seem like they would quickly get into trouble a 10% drop in retail sales with far less issues than a software company operating on 1% margins.
- w0utert 14y ago
  They might not pre-pay for the inventory, but they still have fixed costs, and they are rising, they have over 50k employees now. They _need_ to sell at huge volumes with the profit margins they are taking, otherwise they will bleed money. Some day, the fairy tale of 3000+ P/E and years of making next to no profits or even losses will be over and the stock will tank. Amazon will have a huge problem attracting funding to cover their fixed costs, they will have to fire lots and lots of employees at the expense of service and marketshare, and basically show us what the .com bubble 2.0 looks like.
  - pestaa 14y ago
    This prediction is insightful, but still just a prediction. However, if you state it like it's going to happen tomorrow, it is also spreading FUD.
zaidf 14y ago
All it takes is some relatively minor event (more focused competition, lower consumer spending, some kind of bad media attention) and their stock will tank, and the whole constellation could go down like a house of cards. So if all it will take is a relatively minor event, why hasn't it already happened yet for a company that has been around over 15 years?
- w0utert 14y ago
  I'd say 'because the market still has confidence in Amazon', which is reflected by their market cap. While market cap has no relation whatsoever to the profitability of a company, it does allow Amazon to keep investing in expanding into all the directions they are expanding in. At current valuations, they only have to add ~5M shares (on a current total of ~450M outstanding) to raise around ~$1B. This is not a free ride though, they _will_ have to be able to jack up their profits somewhere in the future, otherwise the stock will sink and they will have a hard time to keep up their strategy of expansion. I'm quite surprised they have been able to keep up this game for so long myself, but it's not totally crazy. Online shopping is has been growing like crazy for since Amazon started, the market today is probably at least a 100 times larger than ~10 years ago. Some day though, growth will start to level off, and looking at Amazon's earnings releases over the last 2 years or so, it seems like we're almost there. It's going to be very interesting to see what happens to Amazon when they cannot keep growing any bigger.
  - Evbn 14y ago
    Stock price has 0 effect on the sustainability of Amazon as a business.
  - zaidf 14y ago
    I guess I don't see your implied meaning of "relatively minor." If the market has had confidence in amazon for so many years, then wouldn't any event that causes them to lose confidence be considered the opposite of minor?