Tom D - re:
>> If this is your understanding of why AMZN's market valuation is near $4 billion, I sincerely request that you & Felicia and some other bears who are so confident reassess the situation with an open mind. I fear you are missing some things here.<<
I feel I do have an open mind, and I certainly read conflicting and fresh views with interest and consideration. My understanding of the stock's current price is that we have an unquantifiable business that may have huge potential. Amazon is the current hot stock in that sector, and is rising on sheer speculation and momentum. And the fervor is being pumped along by the interested parties, such as the underwriters, internet sites, and MF types who are linked into the deal one way or another.
If I'm missing something, it's how Amazon will ever be able to generate earnings that justify the stock price. And strangely, the longs and those hyping the stock stay away from that subject, and instead try to create new measures such as "eyeballs" and hit rates.
>>More likely than not, JMHO, online bookselling is going to liberate publishers from their current obligation to accept returns from bookstores at no charge. Imagine what this does to BKS and BGP business plans if they have to pay interest on the inventory they hold in their stores. <<
You may have a valid point here, but remember that the publishers need the retailers in the worst way. Have you ever worked for a company that manufactures and sells through retail? I have. In many businesses , the retailer has a lot of clout over the manufacturer, because if your product isn't on somebody's shelves, it's not selling.
The book business may undergo some transformations, but I wouldn't just write off the current leaders (BKS, Borders) because of a website that currently has maybe 1% of the market.
First , BKS will pump their site up to a level that will surely compete with Amazon, if not exceed it before long.
Second, the publishers can always ship direct via their own sites, and that has to be the lowest price, period.
Third, nobody yet has shown you can actually make money by selling over the net. It will be a consumer's paradise , a seller's black hole.
Look at what Amazon is - they are an order capturer. They step in as the middleman, and connect a buyer with a seller. They don't make anything. And nobody really needs them , because it is so easy to put a website together that does this.
Bulls counter with the "brand" argument. A brand to me is associated with a product, like Coke, Marlboros, or Kleenex. Not with an order filler. Amazon is hot now because of the novelty, the immense hype (which is mostly self-generated), and the wild ascent of their stock, which has become a momentum trade, feeding on itself in a totally irrational manner.
>>Other thing that impresses me, also not a new idea, is the strength of the Kleiner-Perkins keiretsu. They control more of the internet than any other entity. <<
Yes KP does have a large presence on the net, and in development of new concepts and companies. And in case you haven't noticed, many of these companies' revenues are simply the IPO money being recycled through one another in the form of advertising and cross-promo links. When the smoke clears, and people open their eyes, it will be easy to see that the wild, euphoric expectations are a pipe dream, and many of the stocks will crash.
I do appreciate your sincerity, and I know that many of the longs are true believers - I just don't see the numbers adding up. There is more money being made trading this thing than the company will ever make in profits, and that's the scary part.
I certainly agree with the fact that AMZN is indeed a highly dangerous short at this point - as would be any stock that trades on hype, and is so obviously disconnected from any prudent assessment of what earnings (using conventional accounting) the entity will ever be able to put on the bottom line. |
