Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Internet Analysis - Discussion -- Ignore unavailable to you. Want to Upgrade?

To: musea who wrote (389)	11/30/1999 2:24:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 419

Musea, I thought I'd amuse myself by analyzing the nine month financials of my favorite bubble stock: AMZN. Reading the latest 10-Q reveals the following: For the 9 month period ending Sept 30,1999 we read that AMZN suffered a net loss of $396,755 MM compared to $78,120 in the previous year. Now that's what I call growth! Their net loss is growing at 508% per annum. But let's be fair. Let's look at EBITDA: we have a losses growing from 31,831 to 149,793. EBITDA losses are grew at 471% per annum. Okay, so if things are so bad, how is it that this outfit is still in business? To understand this I looked hard at the cash flow statement and discovered the following: the company increased its A/P by $122MM, and increased other current liabilities by about $28MM. At the same time, it reduced its inventory by $89MM and other current assets by $33 MM. Taken together, these items resulted in a source of cash of $27.4MM. So, we end up with operating cash flow of of <$122.4>MM compared to OCF of <$7.7>MM for the same period last year. So the outflow of cash from operations grew at a mind numbing 1,590%. Way to go!!! But wait, there's more. Suppose we look at free cash flow. The 10-Q reveals that the company spent some $181.9 MM for fixed assets, and $222.9MM for acquisitions, for a total of $404.8 MM, for a free cash flow of <$527.2>MM. That compares to a mere $33MM spent on capital expenditures and acquisitions for the same period last year, which resulted in a FCF of only <40.9>MM. So free cash flow outflows grew at 1,290% So how does this company stay afloat? Simple: it sells its stock through stock option plans ($36.9 MM), and it borrows money (net increase in borrowings were $1,040.8 MM.) Ultimately, the entire structure depends on a high stock price and increasing sales (to fund increasing A/P). When we have a recession stretching over a three quarter period this company will come crashing down, because it will be forced to reduce its A/P at a much faster rate than sales can increase. This also explains why AMZN needs to keep expanding. Without expansion it cannot expand the rate of increase in A/P, which is a primary source of cash for the company. The increase in A/P was $25.4MM for the nine months ending 9/30/98; for the most recent period it increased by $121.8 MM. Why is it that the sell-side analysts don't see this? Obviously, they need to focus on the future, and any bullish scenario ultimately depends on increasing gross margins, and containing expenses. And what evidence is there of that happening? None! Gross margins were 22.5% last year(9 month), and were 21% this year -- the margins are declining! What about expenses? Excluding M&A activities, they were $125.3MM last year and $396.4MM this year. On a percentage of sales basis they increased from 35.1% to 41.1%. Shake hands with the next Boston Chicken. TTFN, CTC