Hi Randy Ellingson; Re: I don't know when Amazon.com will be profitable;
I suspect that within ten years, Amazon will be the largest internet retailer,
bar none. And that they can convert their revenues (perhaps by then $500B?)
into profits which justify today's valuation.
AMZN sold about $1B in the past year. To grow to be a $500B per year company
in 10 years would require a growth rate average of 86% per year. This seems
reasonable in that we all know that AMZN's most recent quarter had revenue
higher by 171%, but nobody is predicting that these sorts of growth rate
are going to be maintained.
My estimates for growth rates has them dropping to 35% by the end of next year.
My method of estimating these growth rates is simple projection into the future.
I am not being unusually negative, my estimates for 1999 revenues match that of
other analysts.
Here are the numbers:
AMZN Growth Rates 3Q99 &c. extrapolated:
Yearly Growth
Date Revenue Increase Change Lossage
---- -------- -------- ------ -------
1Q96 875
2Q96 2230
3Q96 4173
4Q96 8468
1Q97 16005 1729%
2Q97 27855 1150% -579% -33%
3Q97 37887 808% -342% -30%
4Q97 66040 680% -128% -16%
1Q98 87361 446% -234% -34%
2Q98 116044 317% -129% -29%
3Q98 153698 306% -11% -3%
4Q98 252893 283% -23% -8%
1Q99 293643 236% -47% -17%
2Q99 314377 171% -65% -28%
3Q99 356579 132% -39% -23%
4Q99 508314 101% -31% -23%
1Q00 522684 78% -23% -23%
2Q00 503003 60% -18% -23%
3Q00 520605 46% -14% -23%
4Q00 705623 35% -11% -23%
Note that my figures for 1999 add up to $1.472B, which is in line with other
estimates. But this number requires that 3Q99 and 4Q99 growth rates decline
to something like 132% and 101%, respectively. This is getting kind of close
to the growth required to eventually get AMZN to be a $500B company.
And they will be by far the lowest yearly growth rates in AMZN's history.
Notice that 2Q98 sales were only higher than 1Q98 sales by 7%. Extrapolating
that quarterly rate to an annual rate gives an annual figure of 31%, less than
half the amount required to get to $500B in 10 years. Of course this ignores
"seasonality," but the only quarter noticeably better than the others for AMZN
is 4Q, just as is traditional in retail.
As long as we are comparing... Revenues in 2Q99 were only $20.7MM larger
than revenues in 1Q99. On the other hand, revenues in 2Q98 were $28.7MM larger
than 1Q98. In other words, absolute revenue growth is decreasing on a same
quarter, year over year basis.
Even when AMZN meets its goals for sales this year, they will still disappoint,
as compared to previous quarter's growth rates.
-- Carl |
