Amazon Has the Most Generous Shareholders in the World
slate.com
slate.com
And there are many companies not paying dividends. In growing companies it can make sense. The Washington Post pays dividends and is down >50% for the last 5 years, while Amazon is up 166%... Who has the generous shareholders now?
HN has this sort of innate skepticism that is just adorable. I assure you Matt Yglesias knows what he is talking about.
"There are P/E ratios between "massively overvalued" and "massively undervalued" and there is no rule that you have to jump from one territory into the next"
He's making a general point about share price and profit not saying that unless you have giant profits you will be bought out. Low profits are normally punished by wall street, Amazon is an anomaly.
"Who has the generous shareholders now?"
Probably the company with a 3600 P/E ratio.
I'm not saying Amazon isn't overvalued. But to posit that, you have to make a comparison with a similar technology company and compare their respective growth prospects - of course nobody is buying Amazon stock because of their current profits.
A statement like "The P/E is high, other companies have a lower P/E, therefore the shareholders are generous" does not have any value at all and does not reveal profound domain knowledge.
Yglesias is a bright guy, but he's routinely mocked in the political blogosphere for commenting on every issue under the sun, regardless of whether he knows what he's talking about.
It produces a mix of cogent commentary and absolute nonsense, and if you're not familiar with the underlying issues it's very difficult to tell which is which.
I can't cite any examples, because I stopped reading political blogs around 2009. But that was his rep amongst various bloggers and commentors back then.
My impression is the opposite. He's intensely disliked by the firedoglake set for being insufficiently liberal and by conservatives because they are batshit crazy and he said something insensitive after Breitbart died.
As far as being mocked I don't think I've seen much outside of his basketball posts which can indeed be lawlworthy.
Try this endorsement for example: http://marginalrevolution.com/marginalrevolution/2011/11/sum...
The value vs growth argument on amazon has been going in circles for years now. No one is saying anything new anymore.
Perhaps Amazon's investors recognise that there is still a lot of room for growth in online commerce...
Perhaps what's reassuring to investors is that Amazon don't have to change their business model to become profitable. They just need to pull the pricing lever a bit harder.
If Amazon elevates prices a significant amount (what investors seem to be expecting), then they cut out one of their fundamentals.
Now there's a lot to be said that investors aren't looking that far ahead. My personal belief is that most investors these days are looking for stocks and bonds based on the greater fool theory, as opposed to investing with the expectation of earning a future stream of money. Growth stocks are particularly prone to the GFT, and "investing" might not be the best term to describe what buyers of AMZN are doing.
Amazon's entire business model is currently focused on growth through new markets. Here, the idea is that you spend money to make more money in the future. The problem, from an investment perspective, isn't that Amazon's been successful at doing that. Their revenue shows that they've been wildly so. The real problem is that their net income has not been increasing at all (http://ycharts.com/companies/AMZN/net_income ). Since their costs currently aren't scaling well with revenue, it might become a major issue in the future for Amazon's investors.
The market has given Bezos 15 years so far, and to his credit, he's done an outstanding job. Revenue growth has been pretty good for the company, and they're pretty stable. He's managed expectations better than just about any CEO out there, since he's completely open about how his plan is to spend money now to make more money in the future. The market has been fine with that, so far. But there will be a point where the investors will want their investment in Amazon to give a decent return. The question is when that's going to happen, and whether or not Amazon can get all their ducks in a row before it finally does.
They really compete only with other internationals who are also able to "offshore" they're taxes. (That's meant as an observation rather than a political comment).
Let me put this in perspective: Amazon grows consistently between 30-40% a year. Not a big deal...right? I mean lots of companies grow quickly. But how many companies do you know that grow 30-40% per year, when starting from the ~$50B range? They are literally adding a new Fortune 500 company's revenue every year. Nobody does that. And that is what makes them distinct.
You may argue that you still don't think they are worth it. But the story of the 3600x P/E anomaly is actually a story of an anomaly in revenue growth...not of charity, generosity, or ignorance.
Well, AAPL does.
The question is when and if will this revenue growth translate into increasing margins? Revenue growth without profit has very little value (see Groupon) and the nature of their current businesses make it difficult to establish a competitive position where you can increase margins by charging a premium versus your competitors.
For reference - Wal-Mart has operating margins of 6x those of Amazon, has 8x as much revenue as Amazon yet is only valued at 2x that of Amazon. It would take Amazon almost 8 years of nearly 30% growth in revenue and profit margin to match Wal-Mart, a company which trades at a PE in the low teens.
Amazon's customers love them.
I love Amazon, but I hate to think of people being miserable and in terrible pain as they put my order together.
The other part of it is the narrative that Amazon sells.
But let's not pretend it has always defied gravity. Besides the obvious dotcom crash, their stock produced essentially a flat return from June 2000 until April 2007, with various ups and downs.