Amazon Stock....discuss your thoughts on the future | Page 2 | TigerDroppings.com

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ThaBigFella
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re: Amazon Stock....discuss your thoughts on the future


I hear you C but I personally do no shopping anymore for electronics or stuff except amazon....new printer work, new cartridge for another printer, dvds, anything, I mean I hate walmart and I just see the growth in amazon with my own eyes its unreal





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C
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re: Amazon Stock....discuss your thoughts on the future


I'm with you. I buy a ton from Amazon and wish the wife would too (assuming she doesn't just buy more stuff!)







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OFWHAP
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re: Amazon Stock....discuss your thoughts on the future


quote:

You do realize that "investment growth" has NO EFFECT on the current periods EARNINGS. Just to clarify.



In addition Amazon's operating margins are currently 1-2%, and have been falling for the past few years.






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FootballNostradamus
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re: Amazon Stock....discuss your thoughts on the future


Does Amazon pay a dividend or no?





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Korkstand
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re: Amazon Stock....discuss your thoughts on the future


quote:

You do realize that "investment growth" has NO EFFECT on the current periods EARNINGS. Just to clarify.

?? Earnings, profit, and net income are all the same thing, and are AFTER depreciation is factored in. So Amazon's investments in distribution centers most certainly affect their earnings.






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Korkstand
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re: Amazon Stock....discuss your thoughts on the future


quote:

In addition Amazon's operating margins are currently 1-2%, and have been falling for the past few years.

Also affected by capex.






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Korkstand
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re: Amazon Stock....discuss your thoughts on the future


quote:

Does Amazon pay a dividend or no?

No, and probably won't for the foreseeable future.






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ThaBigFella
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re: Amazon Stock....discuss your thoughts on the future


Once you research more you realize it has been in growth mode since they began. They still are. Revenues and moat are the first things on Jeff bezos mind. He realizes that when he stops spending the company will make plenty of money, but for now it is all about becoming the biggest company on Earth. He will do anything to make entry into his playground impossible and he keeps expanding the Moat.


This post was edited on 4/2 at 3:40 pm


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OFWHAP
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re: Amazon Stock....discuss your thoughts on the future


quote:

Also affected by capex.


Are these capital expenditures one-time expenses? What about maintenance for its infrastructure? What about its growing work force? What about expanding security for its cloud services, which have been getting hacked a bunch lately? Amazon more than doubled its PPE expenditures between 2011-2012, which will lead to higher FUTURE depreciation expenses.






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Korkstand
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re: Amazon Stock....discuss your thoughts on the future


quote:

Are these capital expenditures one-time expenses?
Not sure what you mean. Each new facility they build (they've been building about 10 per year) is depreciated over its useful life, but I'm not sure what depreciation method they use.
quote:

What about maintenance for its infrastructure?
What about it?
quote:

What about its growing work force?
Again, what about it? It comes with growth. Besides, Amazon currently makes over 3X in sales per employee that Walmart does.
quote:

What about expanding security for its cloud services, which have been getting hacked a bunch lately?
Amazon got into the cloud business because they needed enough equipment to handle the load of the holiday season, and that computing power was largely untapped for 3/4 of the year. And it is probably much more profitable than people think. I mean, cloud computing will soon be a $100billion industry, and Amazon is and will be a major player. And it's almost an afterthought to them since they need that cloud anyway.
quote:

Amazon more than doubled its PPE expenditures between 2011-2012, which will lead to higher FUTURE depreciation expenses.
In what universe is this a bad thing? They are building the infrastructure required to become the next Walmart, and they are getting to that point at an insanely fast rate.

Here is the bottom line: Amazon is adding almost 10million square feet in distribution centers per year (and every new facility reduces the cost of getting products to consumers), yet they are not in debt. They are building the infrastructure capacity to handle the next decade's sales volume using cash they have right now. It is no accident that Amazon breaks even every year.

The depreciation that eats away at their profits is mainly an artifact of accounting. They make plenty money.






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ThaBigFella
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re: Amazon Stock....discuss your thoughts on the future


so korkstand, where do you see the stock in 10 years? I see you're a true analyst of the stock and not just a guy who sees it the way i did before......a stock @ 3600x earnings.....but more as the monopoly of the future.





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OFWHAP
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re: Amazon Stock....discuss your thoughts on the future


quote:

Here is the bottom line: Amazon is adding almost 10million square feet in distribution centers per year (and every new facility reduces the cost of getting products to consumers), yet they are not in debt. They are building the infrastructure capacity to handle the next decade's sales volume using cash they have right now. It is no accident that Amazon breaks even every year.

The depreciation that eats away at their profits is mainly an artifact of accounting. They make plenty money.


Will these new distribution centers increase revenue growth? Currently Amazon's revenue growth rate is slowing. Its operating expenses are growing at a faster rate than its revenues. Check out Item 7 from Amazon's 1/30/2013 10-K filing.

Amazon issued over $3 billion of debt in Q4 2012 to finance its capital expenditures.

Amazon does not break even every year; its net income was negative for 2012.

As for depreciation, that is a side effect of that fact that companies are allowed to capitalize PPE investments so that they can expense them over time. Otherwise Amazon's PPE expenses in 2012 would have been $3.8 billion as opposed to $2.16 billion.

If you want to compare ratios between Wal Mart and Amazon, here you go:

Wal Mart's net profit margin was 3.78%, its operating margin was 5.93%, and its return on average assets was 8.96%, vs Amazon's net profit margin of 0.19%, op margin of 1.11%, and return on average assets of 0.4%.







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ThaBigFella
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re: Amazon Stock....discuss your thoughts on the future


Amazon just seems to be doing it the right way by going heavy on the buildout to build a network ready to rock retails world by delivering same day without the headaches of brick and mortar shopping





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OFWHAP
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re: Amazon Stock....discuss your thoughts on the future


I haven't really studied the intricacies behind Amazon's strategy to provide same-day delivery but I can only imagine that would become an obscenely expensive business practice. To be honest I was simply going off the numbers from Google finance and its most recent 10-K filing. Its year-end revenue growth for 2010, 2011, and 2012 has been 40%, 41%, and 27% respectively; that's a pretty sharp drop in revenue growth in 2012. At the same time components of its operating costs (fulfillment, marketing, technology & content, and general & administrative) are increasing are growing faster than its revenues.

In addition its outlook for Q1 2013 is as follows:

-A y/y growth rate in sales between 14-26% (a slowdown in growth rate)

-Q1 operating income between $-285 million and $65 million, compared to $192 million in Q1 2012.






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ThaBigFella
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re: Amazon Stock....discuss your thoughts on the future


ya, but their distribution centers if you read the links i posted earlier and moving into the big towns and they want to do same day delivery SOON, theyre already next day. I bought a google chromebook today will be here tomorrow.

It's alot better strategy than walmart's have the customers deliver packages to random strangers that they are proposing lol






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Korkstand
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re: Amazon Stock....discuss your thoughts on the future


quote:

Will these new distribution centers increase revenue growth?
Not directly, but the distribution centers are necessary to support the revenue growth that will happen "naturally" and growth due to new/improved services. Their main function is to reduce fulfillment costs and time.
quote:

Currently Amazon's revenue growth rate is slowing. Its operating expenses are growing at a faster rate than its revenues. Check out Item 7 from Amazon's 1/30/2013 10-K filing.
Amazon's growth rate has dipped below 20% in the past before rebounding. And I'm not sure what you're looking at, but I see operating expenses growing at almost the exact same rate as revenues.
quote:

Amazon issued over $3 billion of debt in Q4 2012 to finance its capital expenditures.
They did that to buy land and buildings that they previously leased, so it will pay off in the long run. Furthermore, with the majority of that at less than 1.2% interest (and the rest at 2.5%), it sounds like good debt to me.
quote:

Amazon does not break even every year; its net income was negative for 2012.
Does it have to be to the dollar for you to consider it "break even"? They were less than one-tenth of 1% away from even in 2012. Hell, I would even call 2011's 1.3% profit breaking even.
quote:

As for depreciation, that is a side effect of that fact that companies are allowed to capitalize PPE investments so that they can expense them over time. Otherwise Amazon's PPE expenses in 2012 would have been $3.8 billion as opposed to $2.16 billion.
It's not that they're "allowed to", it's an attempt to align expenditures with the revenues they generate. This works well for mature companies, but there's a lot of lag for high-growth companies like Amazon. That shiny new facility will show the same depreciation in year 1 as year 10, but it might not reach full revenue-generation capacity until year 5. As long as Amazon can afford more facilities, they will continue building them as the payoff will eventually be that much bigger. Remember, not only do these facilities increase capacity, but they also lower fulfillment and shipping costs, and decrease delivery times to better compete for the need-it-now purchases.
quote:

If you want to compare ratios between Wal Mart and Amazon, here you go:

Wal Mart's net profit margin was 3.78%, its operating margin was 5.93%, and its return on average assets was 8.96%, vs Amazon's net profit margin of 0.19%, op margin of 1.11%, and return on average assets of 0.4%.
Why aren't you comparing Walmart's 3.9% revenue growth to Amazon's 20-30%? Because Amazon is still in the hyper-growth phase, although they did post a very Walmart-esque profit margin of 3.68% just a few short years ago. Amazon could shut down the capex at any time and settle in to a Walmart style growth rate and profit margin, but why should they? Amazon is in uncharted territory as far as online retailers go, and there is absolutely no reason not to go for the gusto.






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ThaBigFella
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re: Amazon Stock....discuss your thoughts on the future


korkstand! you're the guy I wanna hear more from....@262 today do you think its a buy and hold for the next 1 year, 3 yrs, or this is the next walmart hold it for life type stock





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Korkstand
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Plaquemine, LA
Member since Nov 2003
10225 posts

re: Amazon Stock....discuss your thoughts on the future


quote:

do you think its a buy and hold for the next 1 year, 3 yrs, or this is the next walmart hold it for life type stock
If I knew that, I wouldn't tell you fools.

Seriously though, I'm just trying to lay out the reasons why many investors think Amazon is worth its current price, despite the weak earnings.






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