Amazon Misses

[themack89]

I thought this was pretty entertaining...

Just goes to show you can't always trust those fundys!

http://www.zerohedge.com/news/2013-07-25/aamazon-misses-guides-lower-full-hilarious-charts


The company which has made missing and guiding lower into an artform did not disappoint, when moments ago AMZN missed and guided lower.

- Q2 Revenue of $15.7 billion missed expectations of $15.73 billion
- EPS of -$0.02 missed expectations of $0.06
- Firm guides to Q3 revenue of $15.4-$17.15 billion on consensus estimates of $16.99 billion
- Firm sees Q3 operating loss between $65-$440MM, on consensus profit of $84.5 million

But this data on its own is hardly enough to do the company justice. Here is this quarter in its full glorious context.

Q2 Operating and Net Income between 2010 and 2013:


http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/AMZN%20Q2%20breakdown%202010-2013_0.jpg

Free Cash Flow:


http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/AMZN%20FCF_0.jpg

LTM Net Income:


http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/AMZN%20LTM%20Net%20Income_0.jpg

And LTM operating margins:


http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/AMZN%20Margins_0.jpg

And now, how this stock has not surged to $400, scratch that, $1000 right now, is beyond us.


and if you weren't rolling on the floor yet... here's the progression of AMZN's share price compared to its earnings expectations...


http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/07/20130725_AMZN_0.jpg

and its sales expectations...


http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/07/20130725_AMZN1_0.jpg

[e36bmw///]

nm

[-relk-]

Im new to this whole stock market thing, so bear with me if this is a stupid question.

I can't seem to get my head around the fact that they are continuing to climb, yet over the past couple of years their profits and net income have been dwindling. From my breif foray into the stock market, all I have read has said that when this happens, companies tend to decline. Can anyone enlighten me?

[themack89]

Originally posted by -relk-
Im new to this whole stock market thing, so bear with me if this is a stupid question.

I can't seem to get my head around the fact that they are continuing to climb, yet over the past couple of years their profits and net income have been dwindling. From my breif foray into the stock market, all I have read has said that when this happens, companies tend to decline. Can anyone enlighten me?

That is not a stupid question at all...

An answer could be very simple or complicated. I am a big fan of simple, so:

1) Their business is doing poorer and poorer as time goes on.
2) Their stock is bid up higher and higher as time goes on.

Counter-intuitive yes, which is why I posted this.


Originally posted by e36bmw///
haha up another 2% today

I know!! Haha this has become my favorite stock to watch for the next little while.

[Xtrema]

Originally posted by -relk-
Im new to this whole stock market thing, so bear with me if this is a stupid question.

I can't seem to get my head around the fact that they are continuing to climb, yet over the past couple of years their profits and net income have been dwindling. From my breif foray into the stock market, all I have read has said that when this happens, companies tend to decline. Can anyone enlighten me?

Stock has turn into religion. It happens only if you believe!

:rofl:

I think a lot of Amazon's stock is based on the belief that it will be the future Walmart. Price is just a confidence vote and has nothing grounded on reality.

Just like Apple lost almost 1/2 value from peak and most of that lost is on losing Jobs.

[Team_Mclaren]

valuation on Amazon is so fucking insane.

[sputnik]

ZeroHedge is a waste of bandwidth.

Stock prices are hardly (if ever) solely based on net profit.

If you know anything about stocks you will quickly notice that they left out one VERY important graph and that is yearly/quarterly revenue. A revenue chart will show how much of the market they own while profits only show how much cash they keep in the bank at the end of the reporting cycle.

Who would you invest your money with? The kid with one lemonade stand that makes $5 profit every year or the kid that uses his $5 profit to start a second lemonade stand but shows zero profit on his year end report? Do you see how looking at profits doesn't really mean much without a revenue graph?

Here are the last three years of Amazon finances.

http://finance.yahoo.com/q/is?s=AMZN&annual

Notice how the gross profit is actually increasing quite a bit? Basically from $7B to $15B in two years. Sure their net profit is in the red, but if they are spending the gross profit to grow their business (which they are obviously doing based on their revenue going from $34B to $61B) they are fine in my books.

[e36bmw///]

nm

[ZenOps]

Amazon had a couple insane deals last year.

But until they deliver beer and wine, their growth potential will be limited. Durable goods have great shelf life, but small market.

Buffett has the right idea, ketchup packets are money.

[themack89]

I think Zenops hit it--growth.

It's logic if you lower margins you will increase revenue (increase quantity, decrease price: econ 101), it says nothing about their business 'growing'. Amazon is well beyond the lemonade stand analogy and well beyond expansion/growth.

Do you ever wonder why the gold standard of success is earnings per share and profit margins, and not revenue per share? As an example, Apple is rated the most successful hardware company on the planet because they have extreme margins in contrast to competitors who compete in the same business. Not because they sell the most... If Apple wanted to generate gargantuan revenues (more gargantuan than they are now lol), they would simply price at barely above cost. Boom --> margins drop like a rock, revenues sky rocket because quantity sold goes off the charts.

Let me make it easier... Given your beliefs, and the figures presented here, would you buy Amazon confidently at its current valuation? Its just a yes or a no question.

[sputnik]

Originally posted by ZenOps
Amazon had a couple insane deals last year.

But until they deliver beer and wine, their growth potential will be limited. Durable goods have great shelf life, but small market.

Buffett has the right idea, ketchup packets are money.

It is only a matter of time.

Amazon already owns diapers.com, soap.com, vine.com and a variety of other sites selling consumables.

[sputnik]

Originally posted by themack89
I think Zenops hit it--growth.

It's logic if you lower margins you will increase revenue (increase quantity, decrease price: econ 101), it says nothing about their business 'growing'. Amazon is well beyond the lemonade stand analogy and well beyond expansion/growth.

The problem is that the profit margin graph presented used all costs (capital and operating) into the calculation. Unfortunately corporations are only required to put their expenses in a single line on their financial reports so it makes it hard to determine how much of the costs are associated with day-to-day operating expenses versus the costs of expansion and acquiring other companies or other long term assets.

However if you look at their financial reports they list having $32.5B in assets compared to $8B in 2008. Another good sign that the company is continuing to grow.

Last year they purchased Kiva Systems (the company that does their robotic automation for warehouses) for $700+ million has an immediate impact on the balance sheet but should also allow for the ability to sell that service to other distribution chains as well as leverage it in-house for their own needs.


Originally posted by themack89
Let me make it easier... Given your beliefs, and the figures presented here, would you buy Amazon confidently at its current valuation? Its just a yes or a no question.

The problem is that the figures presented by Zerohedge have some serious gaps. Typical for a website that continually sucks in ignorant people with misinformation.

Based on what I see using a full suite of information, I would say that Amazon is a good long term hold and is FAR from financial ruin.