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>Anyone who has invested in Amazon has seen an amazing unprecedented ride upward Only if they sell to realize those gains, and that can only occur if they can

>Anyone who has invested in Amazon has seen an amazing unprecedented ride upward Only if they sell to realize those gains, and that can only occur if they can find a buyer who has an even greater expectation of profit in the future. This concept seems to elude people, but the value of a company that never makes a profit is precisely $0.

mseebach 12y ago
Amazon makes a profit, it just invests all of it in itself, returning you a more valuable stock instead of a dividend. Investors let them do it because the investment made with the profit is worth more than the cash would be. Even with all that, the value of a company that doesn't turn a profit isn't 0, it's the value of it's assets, and Amazon has a lot of those.
- hnnewguy 12y ago
  >the value of a company that doesn't turn a profit isn't 0, it's the value of it's assets Touche. They also have liabilities. I suppose we could be even more precise and say the price is $0 above the expected value of the net assets at the time of liquidation. But my point stands.
  - 1stop 12y ago
    Well go and try a hostile take over of amazon where you purchase 100% of the stocks for $1. Given it's worth $0, $1 is infinitely more than they are expecting. Or admit that your point is absurd.
AndrewKemendo 12y ago
This concept seems to elude people, but the value of a company that never makes a profit is precisely $0. As others have stated profits = revenue - expenses. In this case they are positive on the right hand, even if slightly, so they are in fact making profits. Your time horizon is also wrong and assumes that there needs to be a singular point where the top level goal becomes making profit, rather than profit being a byproduct of a top level goal of adding value. I also disagree with your assertion that value comes solely from profit.
- hnnewguy 12y ago
  >Your time horizon is also wrong and assumes that there needs to be a singular point where the top level goal becomes making profit The top level goal is to provide an adequate return to shareholders. Shareholders (of which I am one) allow massive re-investment with the expectation that net earnings in the future will increase. If you purchase ownership in Amazon (or any other company) for any reason other than to earn a share of their income, that's your prerogative. But you are in a very small minority.
  - jeremyjh 12y ago
    Suppose Amazon were taking all of the profit they pile into capex today, and put cash in the bank. Do you think your share of a growing pile of cash is worthless?
    - brisance 12y ago
      Apparently that's how the stock market values Apple's cash position.
prostoalex 12y ago
At least in the United States, the dividends are taxed twice - first at the corporate tax level, then at dividend recipient's individual tax level. The nature of the taxation to the recipient is involuntary. Selling the stock and being taxed on capital gains is a voluntary act that can be planned for accordingly. A company with zero profit also owes zero taxes at the corporate tax level, which makes reinvestments and stock buybacks a more efficient value distribution strategy.

mseebach 12y ago

Amazon makes a profit, it just invests all of it in itself, returning you a more valuable stock instead of a dividend. Investors let them do it because the investment made with the profit is worth more than the cash would be. Even with all that, the value of a company that doesn't turn a profit isn't 0, it's the value of it's assets, and Amazon has a lot of those.

hnnewguy 12y ago
>the value of a company that doesn't turn a profit isn't 0, it's the value of it's assets Touche. They also have liabilities. I suppose we could be even more precise and say the price is $0 above the expected value of the net assets at the time of liquidation. But my point stands.
- 1stop 12y ago
  Well go and try a hostile take over of amazon where you purchase 100% of the stocks for $1. Given it's worth $0, $1 is infinitely more than they are expecting. Or admit that your point is absurd.

AndrewKemendo 12y ago

This concept seems to elude people, but the value of a company that never makes a profit is precisely $0. As others have stated profits = revenue - expenses. In this case they are positive on the right hand, even if slightly, so they are in fact making profits. Your time horizon is also wrong and assumes that there needs to be a singular point where the top level goal becomes making profit, rather than profit being a byproduct of a top level goal of adding value. I also disagree with your assertion that value comes solely from profit.

hnnewguy 12y ago
>Your time horizon is also wrong and assumes that there needs to be a singular point where the top level goal becomes making profit The top level goal is to provide an adequate return to shareholders. Shareholders (of which I am one) allow massive re-investment with the expectation that net earnings in the future will increase. If you purchase ownership in Amazon (or any other company) for any reason other than to earn a share of their income, that's your prerogative. But you are in a very small minority.
- jeremyjh 12y ago
  Suppose Amazon were taking all of the profit they pile into capex today, and put cash in the bank. Do you think your share of a growing pile of cash is worthless?
  - brisance 12y ago
    Apparently that's how the stock market values Apple's cash position.

prostoalex 12y ago

At least in the United States, the dividends are taxed twice - first at the corporate tax level, then at dividend recipient's individual tax level. The nature of the taxation to the recipient is involuntary. Selling the stock and being taxed on capital gains is a voluntary act that can be planned for accordingly. A company with zero profit also owes zero taxes at the corporate tax level, which makes reinvestments and stock buybacks a more efficient value distribution strategy.