Andy Z in Fortune as contributor: Amazon Bubble

  • Posted: 22 October 2010 12:20 PM

    Andy Z in Fortune as contributor:

    The amazing Amazon stock?bubble

    http://tech.fortune.cnn.com/2010/10/22/the-amazing-amazon-stock-bubble/?source=yahoo_quote

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    Posted: 22 October 2010 12:49 PM #1

    jeffi - 22 October 2010 03:20 PM

    Andy Z in Fortune as contributor:

    The amazing Amazon stock?bubble

    http://tech.fortune.cnn.com/2010/10/22/the-amazing-amazon-stock-bubble/?source=yahoo_quote

    I’ll tell you the reason why: people like myself spend way too much a week at amazon. Neither AAPL or GOOG can say that. Speaking of, I need to order a new M28 Sawzall….

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  • Posted: 22 October 2010 12:59 PM #2

    ‘I?ll tell you the reason why: people like myself spend way too much a week at amazon. Neither AAPL or GOOG can say that. Speaking of, I need to order a new M28 Sawzall?’

    Yes but Amazon eeks out a few percentage points in margin for every $1 spent in their store…  So you would need to spend a significant amount of cash each year at Amazon for them to make the same amount that Apple does on say each iPhone they sell…

    I completely 100% agree with this article.  Amazon is definitely a bubble and it’s certainly sage advice to get out the way of it.

         
  • Posted: 23 October 2010 11:31 AM #3

    Keep beating this drum, as “investors” will start to wake up and see that, by comparison, Apple is a far better place to grow one’s money.  The fundamentals just aren’t there to support AMZN’s rarefied P/E and PEG ratio.  In any event, the sales tax advantage AMZN enjoys is temporary and will likely be the pin-prick.  Enjoy the thing while it lasts, just like all bubbles.

         
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    Posted: 23 October 2010 12:21 PM #4

    Nice article by Andy. The comment thread is also decent. Here’s one I liked (unedited for punctuation):

    two words that might change things a bit for amzn;

    ‘sales tax’.

    i live in seattle where amzn hangs its shingle. i am a ‘prime’ customer, LOVE the company, LOVE the service, and i use it quite a bit…just as long as they are CHEAPER by 10 % (or equally priced to everyone else locally) than other name-brand internet retailers.

    see, in seattle wa, our local sales tax is 10%. so i don’t really care WHERE i get my size 10 1/2 nike air zoom running shoes—it’s all the same to me as my allegiances are to a brand and product i want (nike air zoom) first, and the all mighty dollar second. amazon, the deliverer of my name-brand product, is a distant third.

    for most of those living outside of washington state, amzn typically has the brand name product you want, for a price that beats local (discount) prices by AT LEAST the local price of the product plus sales tax.

    if it doesn’t, you buy it locally. all very rational. kinda like the way all markets work.

    so, given that the window of a tax free internet is closing rapidly ( i believe that not only will local, municipal taxes will be charged, but a national sales tax on ALL internet sales/services is imminent)
    amzn’s main distinctive competence, the advantage it has over a local retailer (for instance) walmart OR walmart.com, is fleeting.

    how much of a multiple does amzn deserve over wmt under these soon-to-be circumstances?

    not a lot, methinks.

    On the other hand, another poster comments how focused they are on technology, so I would argue they are clearly several notches above Walmart, but then what’s Walmart’s P/E…

         
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    Posted: 23 October 2010 12:45 PM #5

    I’m a buyer, not a shopper.  When I’m ready to buy something, I know exactly what I want and don’t need to browse around and compare competing products.  That’s what the internet is for smile

    I despise going to stores.  The driving, the crowds, the waiting in line to give someone my money.  I can go to Amazon, find what I want, know the price is good, and order it in about 30 seconds.  Done.  Delivered right to my door (usually for free).  I spend thousands at Amazon every year.  The shopping experience there for me cannot be beat.  But I digress.

    A 60+ P/E on AMZN is insane.  I would love to short it on fundamentals alone.  Keep in mind how long AMZN has had this rich P/E.  If I had shorted it years ago, I would have lost a ton.  It’s a bubble, but who knows how long the bubble will last.  Could be a long time.  My advice (as well a Andy’s) is to just stay away.

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  • Posted: 23 October 2010 02:42 PM #6

    incorrigible - 23 October 2010 03:45 PM

    A 60+ P/E on AMZN is insane.  I would love to short it on fundamentals alone.  Keep in mind how long AMZN has had this rich P/E.  If I had shorted it years ago, I would have lost a ton.  It’s a bubble, but who knows how long the bubble will last.  Could be a long time.  My advice (as well a Andy’s) is to just stay away.

    Agreed.  I’ve been tempted too long to short AMZN and would have taken a beating if I had.  Tulip bulbs don’t bloom forever..

         
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    Posted: 23 October 2010 06:53 PM #7

    If we knew when the bubble was going to burst, we’d be rich smile

    Since it’s impossible to guess when AMZN “investors” will come to their senses, who knows.

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    Posted: 23 October 2010 07:08 PM #8

    I also live near Seattle, and while I realize I should support both local businesses Amazon and MSFT, I don’t particularly care for investing in either Jeff Bozo’s Amazon or Steve Monkey-Boy’s Microsoft for obvious reasons.  The efficient market theory may not be so efficient, but AMZN will experience PE compression in the future, the $64,000 question is when.

    Anyone have next June’s stock pages today by chance?