Tom,
AMZN is a good business. I'd like to comment on some of your points.
stock rises-so many claims that the rises are fraudulent market manipulation.
It most certainly has been manipulated, especially with short squeezes when end of quarter reporting goes on. Even the media has picked up on this in the past.
The first reason which may support such a large market valuation is that the company has consistently exceeded sales projections. Analyst reports from June '97 projected Q3 '97 revenues of $25M (vs. actual $38M) and Q4 of $35M. Company also exceeded more recent, upwardly-revised projections for Q4 quite handily.
True, but that does not make the company infinitely valuable either! AMZN isn't anywhere near profitable even with mushrooming sales and little competition.
How likely is it that AMZN could have earnings of $1 billion on revenues of $5 billion in ten years?
How likely is it that AMZN will keep growing without BKS, CUC, etc. declaring war in the marketplace? They will not just give sales up!
Candlestick speculated that books could be obsolete in 5-10 years. So far the computer has not replaced newspapers and books because the latter are so cheap, portable and markable with highlighters.
Sorry Candle, but I don't see this happening either (and wouldn't want it anyway!).
I have not seen another issue discussed in the last few hundred postings. That is the fiscal weakness of AMZN's competition. In brief, BKS and Borders use off-balance-sheet operating leases to finance most of their stores.
BKS in particular is not weak! Banks don't think so either as BKS gets loans near 6% where AMZN gets them near 9.5%!
2) Insiders may not sell
They should! One never knows about this activity until it is too late. It is unlikely they won't cash out considering how much personal interest they have in the company. Bezo's could liquidate only 10% of his holdings and it would be a million shares. Look at RMBS as an example when a large sales is done relative to the float. A lot of longs got burned pretty bad when the insiders sold.
What if the institutional insiders and venture capitalists are holding on for five years-where does that leave the shorts
As long as demand for the stock goes way down the shorts will make out just fine. This could happen if the fear of competition sets in. Look at what happened to EGRP when a few competitors popped up. EGRP is even profitable! Most short sellers would not hold short for 5 years, but there are plenty of new shorts always waiting to get in on this stock.
BTW - AMZN will run out of money long before any of this happens, unless they want to get some more loans (probably at 10% the next time). They can keep on getting expensive loans, or do a secondary. As a short guess which one I'm counting on?
Nice chat! I'm obviously short this thing. I sleep a lot better at night than if I'd placed a big bet on the long side. Actually it is best to keep any bets, er investments, small on this stock anyway.
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