Greg, I look at the issue this way: a company is a black box capable of generating cash. The amount of cash that box is expected to generate from now until the end of time together with a time table for the cash generation is the stuff that drives investments. I adjust my thinking based on what I perceive to be the risks ahead, and how much I could make by putting my money into alternate, risk-free investments. Creating a box that is oblong, or octahedral in no way changes how I analyze the box. My analysis is based entirely on the box's output. Nothing else.
But now look at AMZN. According to its 10-Q, operating cash flow in the last 9 mos. decreased from <$5,529> to <$7,663> for the same period a year ago. How did it keep itself afloat? It realized $252MM from financing activities, including $241MM in debt and $11MM in stock sales. The 10-Q shows a positive gross margin of approximately 22%, but that does not include a series of variable expenses (some of which it capitalizes!!! -- like advertizing).
I have some simple question for Amazon: what level of sales will determine its break-even point on a free cash flow basis, and what are its fixed expenses and what are its variable expenses?
From where I sit, the emperor is clearly nude!
TTFN,
CTC |
