4 ms·

Call me old fashioned, but I "value" profitable companies more than unprofitable ones. Amazon had a net loss of $241m last year[1], while Walmart had a net prof

by fixxer 11y ago

Call me old fashioned, but I "value" profitable companies more than unprofitable ones. Amazon had a net loss of $241m last year[1], while Walmart had a net profit of $16b[2]. [1] http://finance.yahoo.com/q/is?s=AMZN+Income+Statement&annual http://finance.yahoo.com/q/is?s=AMZN+Income+Statement&annual [2] http://finance.yahoo.com/q/is?s=wmt+Income+Statement&annual http://finance.yahoo.com/q/is?s=wmt+Income+Statement&annual

SwellJoe 11y ago
The stock market tends to value growth very highly (probably too highly). Amazon is growing faster than Walmart. Not that I disagree with you on how to "value" a company, but the stock market thinks the expected future growth of Amazon is more valuable than the current profit of Walmart.
fahim305 11y ago
profit is irrelevant. their capex is $1B-$2B per quarter. they could lower their capex at any point and show a few hundred million dollars net earnings. the point is that they are as big as they are and continue to invest in the future, and hence the insane p/e ratio and stock price
- fixxer 11y ago
  Let me know when they can shuffle the books and make 16 billion fall out and I'll stop laughing.
  - pnut 11y ago
    On first read I thought you meant a giant warehouse robot shuffling books like a deck of cards. Let me know when they can do that too.
crindy 11y ago
It seems like Amazon is in a position where they could turn a huge profit, they're just choosing to reinvest instead. If they just raised prices by something tiny like 1%, wouldn't their profits become instantly massive?
- fixxer 11y ago
  If consumers were insensitive to that hike, yes. Problem is they aren't, which is why Amazon has to keep reinvesting and operating on that razor thin margin. That strategy is as bad for individual companies as it is for the macroeconomy (Asian tiger bubble comes to mind).
  - DavidHm 11y ago
    They don't have to increase prices. They just need to reduce CAPEX (stop reinvesting the money). Their operating margins are healthy.
aetherson 11y ago
Cool. Go buy Walmart stock. Seriously, guys, all this "Oh, well, I disagree with the valuation of this company" stuff isn't very interesting. We all know that sometimes the market gets the value of companies wrong. Probably if Amazon's next quarter is not very good, its valuation will go back down. And trying to make a virtue of extremely simple analyses of company valuation is also silly. It's not like you're revealing a deeply held secret that Amazon is very low-margin and often runs a loss. It's not like people don't get that. They've decided that Amazon has other virtues. Maybe they're right and maybe they're wrong, but I'm really confident that looking only at net profit as your sole method of valuation is a losing stock market strategy.
- fixxer 11y ago
  Sure, but first you go put all your wealth into AMZN for the next ten years and don't touch it. Think you're any better off from Walmart over that time frame? Valuations are fickle at best. At some point, money needs to be made.
  - throwaway6497 11y ago
    For a 25-30 year time frame AMZN will beat S&P and Walmart by several X. AMZN, GOOG are companies which will have a huge impact on how we live. I have put some money into them. They are Berkshire Hathaways of our time.
    - fixxer 11y ago
      After Lehman, I learned not to say such things.
    - Sven7 11y ago
      25-30 years is too long to predict anything when it comes to tech. The Chinese already have their versions of Google and Amazon...and just like the Japanese automakers in the 70's there is nothing to suggest they can't displace either Amazon or Google. Also what happens tomorrow if you don't have to go anywhere to buy most products, but just fabricate it at home or at the local fab down the road as Neil Gershenfeld predicts.
giaour 11y ago
From the article you're commenting on: "Amazon posted a surprise second-quarter profit"
- fixxer 11y ago
  From the comment you're replying to, that was a "b" for "billion".
skylan_q 11y ago
There different ways to value a company beyond their ability to profit in the near term. Walmart perfected 20th century shopping and are reaping dividends for it in terms of current monetary profits. Amazon is working on perfecting 21st century shopping. Bezos owns 18% of the company and he plays a long game. He sees what others don't see. e.g. He was supposedly an idiot for selling books online.
- _delirium 11y ago
  I don't necessarily disagree with the strategy, but I'm not sure that's Bezos's own game as far as his personal finances go, or that his game is even that long in that respect. Bezos owns an 18% and declining share of the company, which he has been slowly liquidating. He owned 41% when it went public, and has been steadily selling around 1% of the company each year. So his own fortunes are becoming less and less tied to those of Amazon, except in terms of ego/reputation.
- adevine 11y ago
  > e.g. He was supposedly an idiot for selling books online. By whom? Everyone I know who first used Amazon back in the 90s thought it was a great idea. I think it's weird how we've fetishized the idea that "everyone else thought that business plan was crazy except for the visionary founders." If anything, I'd argue these founders are "geniuses" because they executed better than anyone else at the time, not that everyone else thought the idea was crazy.
droopybuns 11y ago
You have a lot in common with the U.S. Department of Treasury. At the end of January of 2015, Wal Mart's income tax was approaching $8B for the previous 12 months. Amazon was 161 million. https://www.stock-analysis-on.net/NYSE/Company/Wal-Mart-Stores-Inc/Analysis/Income-Taxes https://www.stock-analysis-on.net/NYSE/Company/Wal-Mart-Stor... https://www.stock-analysis-on.net/NASDAQ/Company/Amazoncom-Inc/Analysis/Income-Taxes https://www.stock-analysis-on.net/NASDAQ/Company/Amazoncom-I...
- fixxer 11y ago
  Maybe we should lobby for change ;P
pbreit 11y ago
It's really not smart to count that against Amazon. Amazon doesn't run a profit because it believes it can better utilize the money to invest in its business. If that's actually true, it's way more valuable than spinning off cash. Being able to reliably convert large sums of money into substantially larger sums of money is an extremely high value talent.
caminante 11y ago
Accounting profits are too easy to manipulate. Valuation experts prefer to look at cash flows. Here's a precocious '09 writeup on AMZN from an analyst at Andreeson-Horowitz.[1] He points out how Amazon's re-investing CF's to finance capacity, warehouses, real estate, etc. This is instead of realizing accounting profits. [1]http://ben-evans.com/benedictevans/2014/9/4/why-amazon-has-no-profits-and-why-it-works http://ben-evans.com/benedictevans/2014/9/4/why-amazon-has-n... edit: it's worth pointing out that AMZN could be one of the most profitable companies (accounting profits) at the flick of a switch if it diverted its CF's away from capex and internal investment. Its CF's have been enormous for quite some time.

by fixxer 11y ago

SwellJoe 11y ago

The stock market tends to value growth very highly (probably too highly). Amazon is growing faster than Walmart. Not that I disagree with you on how to "value" a company, but the stock market thinks the expected future growth of Amazon is more valuable than the current profit of Walmart.

fahim305 11y ago

profit is irrelevant. their capex is $1B-$2B per quarter. they could lower their capex at any point and show a few hundred million dollars net earnings. the point is that they are as big as they are and continue to invest in the future, and hence the insane p/e ratio and stock price

fixxer 11y ago
Let me know when they can shuffle the books and make 16 billion fall out and I'll stop laughing.
- pnut 11y ago
  On first read I thought you meant a giant warehouse robot shuffling books like a deck of cards. Let me know when they can do that too.

crindy 11y ago

It seems like Amazon is in a position where they could turn a huge profit, they're just choosing to reinvest instead. If they just raised prices by something tiny like 1%, wouldn't their profits become instantly massive?

fixxer 11y ago
If consumers were insensitive to that hike, yes. Problem is they aren't, which is why Amazon has to keep reinvesting and operating on that razor thin margin. That strategy is as bad for individual companies as it is for the macroeconomy (Asian tiger bubble comes to mind).
- DavidHm 11y ago
  They don't have to increase prices. They just need to reduce CAPEX (stop reinvesting the money). Their operating margins are healthy.

aetherson 11y ago

Cool. Go buy Walmart stock. Seriously, guys, all this "Oh, well, I disagree with the valuation of this company" stuff isn't very interesting. We all know that sometimes the market gets the value of companies wrong. Probably if Amazon's next quarter is not very good, its valuation will go back down. And trying to make a virtue of extremely simple analyses of company valuation is also silly. It's not like you're revealing a deeply held secret that Amazon is very low-margin and often runs a loss. It's not like people don't get that. They've decided that Amazon has other virtues. Maybe they're right and maybe they're wrong, but I'm really confident that looking only at net profit as your sole method of valuation is a losing stock market strategy.

fixxer 11y ago
Sure, but first you go put all your wealth into AMZN for the next ten years and don't touch it. Think you're any better off from Walmart over that time frame? Valuations are fickle at best. At some point, money needs to be made.
- throwaway6497 11y ago
  For a 25-30 year time frame AMZN will beat S&P and Walmart by several X. AMZN, GOOG are companies which will have a huge impact on how we live. I have put some money into them. They are Berkshire Hathaways of our time.
  - fixxer 11y ago
    After Lehman, I learned not to say such things.
  - Sven7 11y ago
    25-30 years is too long to predict anything when it comes to tech. The Chinese already have their versions of Google and Amazon...and just like the Japanese automakers in the 70's there is nothing to suggest they can't displace either Amazon or Google. Also what happens tomorrow if you don't have to go anywhere to buy most products, but just fabricate it at home or at the local fab down the road as Neil Gershenfeld predicts.

giaour 11y ago

From the article you're commenting on: "Amazon posted a surprise second-quarter profit"

fixxer 11y ago
From the comment you're replying to, that was a "b" for "billion".

skylan_q 11y ago

There different ways to value a company beyond their ability to profit in the near term. Walmart perfected 20th century shopping and are reaping dividends for it in terms of current monetary profits. Amazon is working on perfecting 21st century shopping. Bezos owns 18% of the company and he plays a long game. He sees what others don't see. e.g. He was supposedly an idiot for selling books online.

_delirium 11y ago
I don't necessarily disagree with the strategy, but I'm not sure that's Bezos's own game as far as his personal finances go, or that his game is even that long in that respect. Bezos owns an 18% and declining share of the company, which he has been slowly liquidating. He owned 41% when it went public, and has been steadily selling around 1% of the company each year. So his own fortunes are becoming less and less tied to those of Amazon, except in terms of ego/reputation.
adevine 11y ago
> e.g. He was supposedly an idiot for selling books online. By whom? Everyone I know who first used Amazon back in the 90s thought it was a great idea. I think it's weird how we've fetishized the idea that "everyone else thought that business plan was crazy except for the visionary founders." If anything, I'd argue these founders are "geniuses" because they executed better than anyone else at the time, not that everyone else thought the idea was crazy.

droopybuns 11y ago

You have a lot in common with the U.S. Department of Treasury. At the end of January of 2015, Wal Mart's income tax was approaching $8B for the previous 12 months. Amazon was 161 million. https://www.stock-analysis-on.net/NYSE/Company/Wal-Mart-Stores-Inc/Analysis/Income-Taxes https://www.stock-analysis-on.net/NYSE/Company/Wal-Mart-Stor... https://www.stock-analysis-on.net/NASDAQ/Company/Amazoncom-Inc/Analysis/Income-Taxes https://www.stock-analysis-on.net/NASDAQ/Company/Amazoncom-I...

fixxer 11y ago
Maybe we should lobby for change ;P

pbreit 11y ago

It's really not smart to count that against Amazon. Amazon doesn't run a profit because it believes it can better utilize the money to invest in its business. If that's actually true, it's way more valuable than spinning off cash. Being able to reliably convert large sums of money into substantially larger sums of money is an extremely high value talent.

caminante 11y ago

Accounting profits are too easy to manipulate. Valuation experts prefer to look at cash flows. Here's a precocious '09 writeup on AMZN from an analyst at Andreeson-Horowitz.[1] He points out how Amazon's re-investing CF's to finance capacity, warehouses, real estate, etc. This is instead of realizing accounting profits. [1]http://ben-evans.com/benedictevans/2014/9/4/why-amazon-has-no-profits-and-why-it-works http://ben-evans.com/benedictevans/2014/9/4/why-amazon-has-n... edit: it's worth pointing out that AMZN could be one of the most profitable companies (accounting profits) at the flick of a switch if it diverted its CF's away from capex and internal investment. Its CF's have been enormous for quite some time.