Jeff, stock split is last year topic....:)
When talking about value, we are talking about expectation. Price goes up and down because there are different expectations.
One interesting moment last year as I remember. There are two analyst gave comment on AMZN future price, this happened around one month before stock split announcement 3:1. One analyst from Deutsche Bank, Alan Braverman (now become BOA Securities analyst), gave $400 as his target on AMZN. The price at that time was up to around $200 from $160-170 (I forgot exact number, please correct me if I am wrong). On the same day, one analyst from Merrill Lynch said AMZN is worth only $50. After market closed, CNBC invited them to gave their argument on their predictions.
Now, we know who was right....:)
For information, by January 1999, AMZN almost hit $600 (adjusted pre split price) or $199 post split 3:1.
On June 3, 1999, one analyst from DLJ put $280 as the target. On month later or today after market closed, AMZN declared 2:1 stock split when the price at $125's.
Looks like the history will repeat itself....:)
You are absolutely right, stock split doesn't have direct relation with company operation. But you forgot with the one important thing, and I think one most important think, the psychology of buyers and sellers. For me, as a daytrader, there is absolutely a big different psychology between price at $150 and price at $75.
Talking about psychology, for me, technical analysis or analysis based on chart is also talking about market psychology or characteristic of the market such as support, resistance, double bottoms, double tops, break-out, head & shoulders, tunnel, bollinger, RSI, moving average, etc. All of them doesn't have any direct relations to company operation, right? But we use them to help our daytrading, in & out. Of course there is no guarantee to predict it 100%.
Now, back to AMZN potential market.
Try to figure out the potential market on books, music, videos, auctions, toys, electronics, drugs, homegroceries, etc. How many hundreds billions on them. From conference call, I hear only on electronics, the potential market is around 100 billions.
Now, I make my own analysis, the potential market on Amazon.com in the future on all of their business will become around 200 billions dollar around the world (not only in US) by 2003/4. Assume net margin (after tax) is around 5%, so net profit will become around 10 billions. Let's put P/E 15 on 10 billions net profit. So, the potential market capitalization on Amazon.com should be around 150 billions dollar. Now, market capitalization only around 20 billions dollar at $125/share. There is 650% potential return on investment in 4 or 5 year investment. Not a bad return, right...:)
Remember, I talked on P/E 15, not 40....:)
As a daytrader, of course, I won't hold this stock for 4 or 5 years. I trade it, in & out. But, based on new "stores" on toys and electronics few days ago, I absolutely have great confidence that this stock will go nowhere but up. The momentum is here on AMZN. New stores, high growth sales, stock split....:)
Also, take a look on its chart. Great legs.
Before I forget, for me, there is no big different between loss 40c and loss 51c but there will be big different between profit 40c and profit 51c. Got my point here?....:)
Now, let's wait for Alan Greenspan testimony tomorrow.
Good luck and enjoy the ride.
p.s.:
my analysis will have bad situation if WWIII or
the Judgement Day come earlier than 2003/4....:)
MM |
