Can Anyone Explain Amazon's Stock Prices for Me?

Discussion in 'Too Hot for Swamp Gas' started by AzCatFan, Jul 25, 2013.

  1. AzCatFan

    AzCatFan Well-Known Member

    Joined:
    Apr 9, 2007
    Messages:
    7,745
    Likes Received:
    243
    Trophy Points:
    63
    I just don't get it. Amazon does keep selling more volume, but they keep missing expectations. Plus their operating margins keep getting smaller and smaller, their net income is going down, and this last quarter, they posted a loss. Yet their stock continues to go up? What am I missing? Here are the charts from Zero Hedge.

    Operating Net Income between 2010 and 2013
    [​IMG]

    Operating margins
    [​IMG]

    Stock price compared to earnings
    [​IMG]

    If this were 2003, maybe I can see why people would be high on Amazon. But it's 2013, and this stuff has been going on for years. And my questions are, what new advancement is going to allow Amazon to start increasing its margins and subsequently its profits? Or is Amazon's stock price, and the company, in for a rude awakening? Or have the rules of investing change so much that profit is meaningless?

    Please, someone explain this to me.
  2. AzCatFan

    AzCatFan Well-Known Member

    Joined:
    Apr 9, 2007
    Messages:
    7,745
    Likes Received:
    243
    Trophy Points:
    63
    (Please move to THFSG). Thought I was on that board and made a mistake. Sorry.
  3. LimeyGator

    LimeyGator Well-Known Member

    Joined:
    Dec 31, 2009
    Messages:
    3,053
    Likes Received:
    494
    Trophy Points:
    83
    Location:
    I'm a Limey Gator from Limeyland.
    It's called the FSU effect. In theory, their recruiting classes have been getting better and better of late, but the reality is that they always find an even bigger way to disappoint their fanbase each new season. Quite the anomaly!
  4. Brad

    Brad New Member

    Joined:
    Apr 3, 2007
    Messages:
    685
    Likes Received:
    0
    Trophy Points:
    0
    Location:
    Jacksonville, FL
    I think your mistake is that you are assuming that markets and investors are rational....
  5. SeaCay

    SeaCay Well-Known Member

    Joined:
    Dec 16, 2008
    Messages:
    1,928
    Likes Received:
    87
    Trophy Points:
    48
    Location:
    Lake Alice Field
    Does Amazon run a 4.2 40, have good hands and gets clear separation in the secondary? If not, IDGAF.
  6. ufhomerj31

    ufhomerj31 Active Member

    Joined:
    Jan 5, 2010
    Messages:
    717
    Likes Received:
    50
    Trophy Points:
    28
    bingo.
  7. Go2gtr

    Go2gtr Well-Known Member

    Joined:
    Apr 8, 2007
    Messages:
    14,074
    Likes Received:
    73
    Trophy Points:
    48
  8. G8R92

    G8R92 Well-Known Member

    Joined:
    Feb 5, 2010
    Messages:
    2,409
    Likes Received:
    110
    Trophy Points:
    63
    I don't get it either. Amazon somehow wins in spite of poor mechanics.
  9. corpgator

    corpgator Well-Known Member

    Joined:
    May 9, 2010
    Messages:
    6,319
    Likes Received:
    164
    Trophy Points:
    63
    Market share. They have the biggest slice of the internet pie. They are the biggest bookseller in the world.

    All in all, though, it seems like corporate welfare in reverse. It's like investors feel guilty for all the harm they've done and want to give something back.
  10. demosthenes

    demosthenes Well-Known Member

    Joined:
    Apr 3, 2007
    Messages:
    7,714
    Likes Received:
    314
    Trophy Points:
    83
    Location:
    Portland, OR
    After they drive a few more local stores out of business they can raise prices and increase their margin. ;)
  11. Swampmaster

    Swampmaster New Member

    Joined:
    Apr 11, 2007
    Messages:
    20,264
    Likes Received:
    51
    Trophy Points:
    0
    the market expects bigger things from amazon--stock prices are all about the future
  12. gator10010

    gator10010 VIP Member

    Joined:
    Aug 23, 2008
    Messages:
    1,364
    Likes Received:
    9
    Trophy Points:
    38
    I agree with you that Amazon is over priced but Amazon isn't just standing still they are getting into new markets and experimenting with new services.

    For example last year Amazon launched a site targeted at the business to business market in AmazonSupply.com the B2B market is about 3 times larger than the business to consumer market which Amazon dominates on line. Amazon is also experimenting with same day delivery in certain cities. These two things alone a big opportunities for Amazon,throw in their ppc campaigns, tablet sales, book sales and the fact they charge their vendors a premium to sell on their site and you can begin to see the potential of Amazon. .....but I still wouldn't buy any Amazon stock.
  13. urg8rbait

    urg8rbait Member

    Joined:
    Dec 29, 2010
    Messages:
    284
    Likes Received:
    1
    Trophy Points:
    18
    Ugh.. All choices and actions are rational. You mean to say that his mistake is that he's assuming that markets are making good rational decisions as opposed to bad rational decisions.
  14. dadx4

    dadx4 Well-Known Member

    Joined:
    Apr 3, 2007
    Messages:
    30,326
    Likes Received:
    748
    Trophy Points:
    113
    Location:
    Gainesville, Fl
    I have been a financial advisor for 20 years, Amazon defies all logic when it comes to stock valuations. I have never owned it and I have never sold it to one single customer.
  15. GatorRade

    GatorRade Well-Known Member

    Joined:
    Apr 3, 2007
    Messages:
    7,417
    Likes Received:
    364
    Trophy Points:
    83
    There are actually countless experimental examples of irrational economic behavior, where goods are demonstrably mis-valued. Here is one:

    http://www.newyorker.com/arts/critics/books/2008/02/25/080225crbo_books_kolbert?currentPage=2

    Edit: However, I do think that "investors are irrational" is a poor explanation for a large, seemingly obvious over-valuing in the price of Amazon stock.
  16. Distant Gator

    Distant Gator Well-Known Member

    Joined:
    Apr 9, 2007
    Messages:
    4,362
    Likes Received:
    219
    Trophy Points:
    63
    Location:
    Upstate, SC
    Cat Fan, I've been following AMZN for years- even shorting it. It is very painful.

    It's the strangest and most mystifying thing. Yes their revenue is growing fast but THEY CAN'T MAKE A DIME OF PROFIT. For many years now they have always projected profit NEXT YEAR, but next year never comes. They've done this for the last 5+ years.

    My own opinion is that their CEO, Bezos, is the ultimate charlatan. He is getting them into all sorts of businesses to keep dazzling the ignorant investor, and keep growing revenue, but has no plan to make profit from these businesses. He will figure that out later, so to speak. But later never comes. But it works. The stock keeps going up so a lot of investors love it because it's up. (In a religion thread you might call this a tautology. It works the same way.)

    One other thing- I've noticed that when Wall Street has no valuations, then they do a really poor job of putting theoretical valuations on a company. (If that makes sense.)

    In other words, for Amazon there is no profit- just promises of future profits somewhere down the road. So instead of assuming a reasonable profit of say, $8/ share one day and valuating it at a 20x PE ($160 stock), Wall Street just says "I don't know the future profit, therefore it could be infinite, so I'll keep buying at $300."

    But Amazon is not the worst example. Look at Netflix and Tesla's valuation. Tesla especially is the dumbest thing out there. $14 billion valuation for a company that doesn't even gross a half a billion. That's 28 times revenues!
  17. wgbgator

    wgbgator Sub-optimal Poster Premium Member

    Joined:
    Apr 19, 2007
    Messages:
    24,148
    Likes Received:
    528
    Trophy Points:
    113
    Location:
    Orlando, FL
    Amazon wants to get into the original content game and also get even better at quick delivery, so maybe they are viewed in terms of potential, rather than on current value. I think that tends to happen with companies that are viewed as innovative, like Apple. Though its kind of the opposite problem for them, they announce ridiculous quarterly profits and people are like "meh" because they arent to the scale they were when iPhones had more market share, or the iPad was a new thing.
  18. exiledgator

    exiledgator Gruntled Premium Member

    Joined:
    Jan 5, 2010
    Messages:
    10,525
    Likes Received:
    1,185
    Trophy Points:
    113
    Location:
    Maine
    Could it have anything to do with them being a huge player in the cloud?

    Google "AWS", if you're not familiar.

    It's becoming more ubiquitous everyday.
  19. urg8rbait

    urg8rbait Member

    Joined:
    Dec 29, 2010
    Messages:
    284
    Likes Received:
    1
    Trophy Points:
    18
    Price and value are subjective. So this experiment doesn't really say anything. If there was some kind of thought process that went into making a conclusion then it is rational no matter if the decision was good or bad.
  20. wgbgator

    wgbgator Sub-optimal Poster Premium Member

    Joined:
    Apr 19, 2007
    Messages:
    24,148
    Likes Received:
    528
    Trophy Points:
    113
    Location:
    Orlando, FL
    "Some kind of though process" is not "rational no matter." If you conclude something is "cool looking" and then buy it, that is not a "rational" decision.

Share This Page