just what future activities do you suggest are the basis for valuation?
Educated guesses (as opposed to "demonstrated" facts). You ought to know that.
can not be shown, under a reasoned set of assumptions...
"Demonstrate", in this context, does not imply proof or any sort of guarantee, just some set of assumptions under which the future revenues, expenses and capital needs of the business can be projected.
Ah, if that's what you want, look at the 10-Q, subtract 80% of advertising costs from the balance sheet and you got a profitable company. Since most other bookstores advertise little, I think one can safely presume that once Amazon.com has established itself as a place where books are cheap (if not the cheapest) and delivery is fast (as well as dirt cheap) there would be no further need for large advertising.
Note: regarding shipping once Amazon ships over $100 million they will be able to extract large discounts from shippers. I understand DHL gives them special fares already as it is.
as long as the "fundamentals are not collapsing", that the valuation will not fall.
See AOL or MSFT for example. IMHO both companies have been way ahead of their true value and/or risk-reward opportunity. Yet they have delivered thus far (more or less) and continue to hold lofty valuations. (MSFT is not worth 20x sales or 60x earnings if you ask me).
If the expectations of losses of a business are growing such that analysts would revise estimates to reflect bigger losses than previously expected, can it reasonably be argued that the "fundamentals are not collapsing"? Or at least are not falling shy of expectations?
This is a good point. One could make half-an-argument towards fundamentals collapse when losses ahve to be revised upwards. The other half is of course falling revenues. So AMZN is 50% of the way towards becoming a great short opportunity.
would it simply move sideways in hopes of the fundamentals improving and eventually catching up, even if that takes five to ten years under optimistic assumptions? What about opportunity cost? What about a return for assuming the risk that those fundamentals may never catch up?
Ask yourself, is it really worth the risk to short a stock such as this on the expectation of having it move sideways?
that has been able to do so while dramatically slashing advertising/marketing expenditures?
This is not what I said. There will be a time in the future when AMZN will be able to drastically cut on advertising expenses. Current balance sheet suggests that such reduction alone would be sufficient to make AMZN a profitable company.
However, to argue that buying is based on any rational, reasoned set of expectations about the future of this company is simply ludicrous.
That is even further away from what I said. I wrote "do not short companies without collapsing fundamentals".
There is a long way between "do not short" and "current price is rational".
My recommendation for AMZN is "do not touch", neither long nor short. It has enough growth potential that it could be worth $5 billion some day. It has enough competition ahead that it might not be worth more than $600 million.
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