Amazon earnings: selling a tablet at $50 less than cost is…

  • Posted: 25 October 2011 07:56 PM

    not going to bode well for Jan earnings release.  Everyone they sell could be the death of a thousand ( or a couple of million) knives.  Profit this qtr down: get this, 73%  for a year ago.  A current P/E of 100 and PEG of 3.8 is a high price to pay for a company that has made a strategic decision to compete in the tablet market by sending each customer $50 with the purchase of a tablet.  I knew the tablet decision would hurt AMZN but way underestimated by how much.

         
  • Posted: 25 October 2011 08:01 PM #1

    Do you have a link that documents the $50 number?

         
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    Posted: 25 October 2011 08:04 PM #2

    We don’t know, though you are certainly justified in suspecting, that the Kindle Fire is a loss leader based on the $199 price.

    AMZN is no longer a WS darling.  Scrutiny will increase.  Creates risky, but fun, opportunities for some of us traders.

    Mercel?  Care to join us? LOL

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    Thanks, Steve.

         
  • Posted: 25 October 2011 08:36 PM #3

    Lstream - 25 October 2011 11:01 PM

    Do you have a link that documents the $50 number?

    Second from last paragraph
    http://www.bizjournals.com/seattle/news/2011/10/25/amazon-profit-drops-73-low-kindle.html?ana=yfcpc

    Frank

         
  • Posted: 25 October 2011 08:48 PM #4

    Lstream - 25 October 2011 11:01 PM

    Do you have a link that documents the $50 number?

    Here is another:  http://www.pcmag.com/article2/0,2817,2393835,00.asp#fbid=jvaN6iIKtLZ

    Other estimates claim they loose 10%.  Obviously even selling at cost would equal 0 profit and that will drag on all positive margins.  The more they sell the more it hurts so to speak.  Without going on a rant GOOGi is doing exactly the same thing with Andriod but have the massive profits of their Adsense search/advertising product to subside the Android team hence the 76% of revenue from advertising and 4% for everything else.

         
  • Posted: 25 October 2011 09:19 PM #5

    So does anyone want to support or rebut the idea that money moving out of NFLX and/or AMZN will move to AAPL?  Thoughts?

    Frank

         
  • Posted: 25 October 2011 10:16 PM #6

    fas550 - 26 October 2011 12:19 AM

    So does anyone want to support or rebut the idea that money moving out of NFLX and/or AMZN will move to AAPL?  Thoughts?

    Frank

    Well I’m historically a long shareholder in AAPL, buying and selling, but essentially long.  I’m still long AAPL, but I was pissed off at Amazon’s P/E of 100+.  After I saw NetFlix get chopped I decided to short Amazon right before market close today….lucky me.

    But the question is now - when to cover the Amazon short.

         
  • Posted: 25 October 2011 10:48 PM #7

    HD - 26 October 2011 01:16 AM
    fas550 - 26 October 2011 12:19 AM

    So does anyone want to support or rebut the idea that money moving out of NFLX and/or AMZN will move to AAPL?  Thoughts?

    Frank

    Well I’m historically a long shareholder in AAPL, buying and selling, but essentially long.  I’m still long AAPL, but I was pissed off at Amazon’s P/E of 100+.  After I saw NetFlix get chopped I decided to short Amazon right before market close today….lucky me.

    But the question is now - when to cover the Amazon short.

    My .02: I think the markets iabout to correct and a stock with a 100PE, lower margins and lower guidance has a ways to fall.  No where near as bad as NFLX (given the measure RH had to go to to cover his off book obligations) but another $20 would not be surprising
    Frank

         
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    Posted: 25 October 2011 11:42 PM #8

    I may be looking at another bear put spread (because I don’t know any better) on AMZN.  Probably farther out than a month or two.

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    Thanks, Steve.

         
  • Posted: 26 October 2011 05:47 AM #9

    i bought some 2014 puts (strike 180) last Friday…planning to keep them another couple of months….
    I really do not understand how they can only drop 10% with such a miss and a guidance that looks like it has been done by a 5 year old…

    even after the AH drop it is still one of the most overvalued companies out there…

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  • Posted: 26 October 2011 09:00 AM #10

    N.L. - 26 October 2011 08:47 AM

    i bought some 2014 puts (strike 180) last Friday…planning to keep them another couple of months….
    I really do not understand how they can only drop 10% with such a miss and a guidance that looks like it has been done by a 5 year old…

    even after the AH drop it is still one of the most overvalued companies out there…

    With a rich PE OF 20, it should be 40$ stock. Its a retail store after all.
    Is the conviction out here that they can grow that quickly? I could never understand this one.

         
  • Posted: 26 October 2011 09:05 AM #11

    N.L. - 26 October 2011 08:47 AM

    i bought some 2014 puts (strike 180) last Friday…planning to keep them another couple of months….
    I really do not understand how they can only drop 10% with such a miss and a guidance that looks like it has been done by a 5 year old…

    even after the AH drop it is still one of the most overvalued companies out there…

    Sorry what I meant was another $20 during regular trading (over time) at least IN ADDITION TO the $20+ in AH (I had just looked at the AH numbers when I wrote the post).  Yes I would not be surprised to see a $40 drop some time in this qtr. 

    Frank

         
  • Posted: 26 October 2011 11:05 AM #12

    less than 10% down… i just don’t get it….:-(

    imagine that Apple came out with results and guidance like this….

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    Posted: 27 October 2011 01:07 AM #13

    Blodgett’s Amazon shill piece is absolutely disgusting. This JA is the biggest F’ing shill/crook going:
    http://finance.yahoo.com/blogs/daily-ticker/dear-america-time-big-thank-amazon-141036276.html;_ylt=AqNX._dJZUO09SRR5xe0FMS7YWsA;_ylu=X3oDMTFjNzM2aXUzBHBvcwM0BHNlYwNGUERhaWx5VGlja2VyQmxvZwRzbGsDaXRzdGltZXRvc2F5

         
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    Posted: 27 October 2011 01:26 PM #14

    I’ve held back as long as I can. Somebody’s got to say it.

    Why would it be a surprise that Amazon lost money when they had a FIRE SALE?

    [there I feel better now]

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    Posted: 27 October 2011 03:21 PM #15

    “According to analysts”. First and foremost, even if the analysts are correct, there is such a thing as a “cost curve” that should trend down for a product like this when enough are produced.

    The most interesting thing about K-Fire in my view is the Prime trial accompanying it. Converted trials are an $80 annuity with a loyalty lock-in.

    All that said, AMZN with a 100+ P/E is way pricey. K-Fire is a bold move into high margin digital product, and maybe they grow their business quicker than the stock price appreciates. I’d be more comfortable with a P/E around 50, because they face a near certain sales tax risk to their core physical distribution business within a year.