AMZN is still a bargain! Look at Cramer's view vs. Wal-Mart
"Give me a break. Wal-Mart is a company with $183 billion in market cap that is burdened by pilferage, sales tax and inventory concerns. It has massive real-estate costs with all of the attendant costs: electric, insurance, health care, blah, blah, blah. Amazon is a company with a $22 billion market cap with none of those burdens."
See the full article below:
Amazon's Glass Is Half-Full -- and Rising
By James J. Cramer
1/6/99 1:23 PM ET
Let's get out the back of the envelope. At the pace of Amazon's
(AMZN:Nasdaq) fourth quarter, the company could do a billion in sales.
Amazon's market capitalization is now $22 billion. Are we paying too much
for that revenue?
As long as I have been in the business, the benchmark for retailing was
Wal-Mart (WMT:NYSE). When Wal-Mart hit a billion in revenue in 1980, its
market cap was $2.3 billion. By that benchmark, Amazon is hideously
overvalued -- 10 times so.
Where was Wal-Mart when it had Amazon's market cap? That's even more
telling: In 1987, the greatest retailing story ever reached $22 billion in
market cap. At that point, it had net income of $628 million! Amazon
should lose $114 million.
The only logical conclusion is that the market is way out of whack in how it
values Amazon. Wrong!
The only logical conclusion is that the comparison is meaningless and
irrelevant. It would have been wrong for a massive amount of money. And
it will remain wrong.
A "skeptic" says that Amazon shouldn't be here based on the "rigorous"
back-of-the-envelope comparison with Wal-Mart. But an opportunist says,
Give me a break. Wal-Mart is a company with $183 billion in market cap
that is burdened by pilferage, sales tax and inventory concerns. It has
massive real-estate costs with all of the attendant costs: electric, insurance,
health care, blah, blah, blah. Amazon is a company with a $22 billion
market cap with none of those burdens.
The opportunist says all of these comparisons are simply odious and
misleading. Amazon is a retailer in name only; in fact, it is a distribution
company with the potential for gross margins that would put Wal-Mart to
shame if it executes. And right now, it is executing. That makes it worth
taking the gamble.
You only need one $22 billion market cap stock that goes to $183 billion
to become very, very rich -- which, last I looked, was still the goal. Maybe
you are paying too much for that ticket right now, but maybe not. We don't
know which Net company will be a winner, but we do know that there will
be winners. Right now, Amazon is looking like a winner.
Or, to borrow an analogy from another tech business that many people
were too skeptical about, had you put equal amounts of money in Software
Pub, VisiCalc, Ashton-Tate and Microsoft in 1986, how much money would
you have?
Answer: a ton. |
