Sun, you miss a small thing about the Amazon capital structure, which is the way they finance their working capital (which in their case is actually negative working capital).
At 30 September, if memory serves, Amazon had about $500mm of payables and accrued expenses vs. maybe $200mm of inventories and prepaids. So ex their cash, they have a negative working cap balance of about $300mm, which as far as I am concerned is debt, and short term debt at that. In part, Amazon is financing their business on the wallets of their suppliers.
The reason this matters (and this is the heart of Ravi Suria's argument against the company) is that as the cash balance dwindles, suppliers MAY be less inclined to offer Amazon the generous terms that supports that $300mm that Amazon has effectively "borrowed" from their suppliers. IF suppliers were to pull back on their offers of "credit" to Amazon because they come to fear that they wouldn't get paid back, that is exactly the sort of thing that COULD precipitate a serious liquidity crunch at Amazon; they for all practical purposes need that negative working capital balance to operate.
Now, I don't think I'd bet on this happening just yet; I would wait until the Q4:01 and likely the Q1:02 balance sheets (remember that Q4 is going to be skewed because they will have gotten cash IN for Christmas but not paid it OUT yet to suppliers). But Amazon very definitely COULD have liquidity problems before the maturity dates on their debt.
On CAKE, I think that somebody had asked me at some point (back around Halloween) for names of companies that could be hurt if mall traffic really fell. I postulated that if one were looking for EVENT risk, CAKE might be a good target; they only have about 47 units so only a small handful doing poorly could adversely effect results. That said, I would not short the stock; as somebody else pointed out the economics of the business are actually quite good, and they generate sufficient cash flow (even if comps were to be weak) to cover their build plans. This is the sort of stock that in a very low interest rate environment could trade at a HUGE multiple (like BBBY or KKD) as it would be one of only a few "legitimate" growth stocks. It is certainly NOT a liquidity risk (which as you know is the kind of company I'm after).
Cheers |
