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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Steve Lachance who wrote (11489)	7/23/1998 10:08:00 AM
From: H James Morris	Read Replies (1) \| Respond to of 164684

I'm tired of these guys accusing the Batemans of the world for being greedy. My gosh don't they know he's only a 'Common ' guy? If you understand the two major conflicting views of the stock market you may be able to sympathize with those whose job it is to anticipate the direction of prices. The contradictory evidence is enough to split the personality of a genius, which your broker probably is not, or even the most philosophically well-grounded individual of your acquaintance. Over here, so to speak, you have an assortment of evidence that stocks are grossly overpriced. So much evidence, in fact, that you can pick and choose from a grab-bag of ratios and norms that have been exceeded. The price-earnings ratio of the Standard & Poor's 500-stock index, for instance, is now about 30 on the basis of the past 12-month earnings, and probably between 25 and 30 based on this year's anticipated earnings. Contrast that with the average postwar price-earnings ratio of 13.7, which means investors are paying less than 14 times one year's per-share earnings. And don't forget that the term ''postwar,'' which only yesterday, it seems, was equated with ''recent,'' now refers to a period of one-half century. A P-E of the present dimensions, therefore, would seem to qualify as abnormal. But it is more astonishing still when you consider that the expectations it depicts come atop a three-year record-breaking rise. According to Standard & Poor's, in the 3 1/2 years through June 30, its index had risen 147 percent. Match that against the next best showing for a similar period since World War II and you come up with 93 percent. In other words, the current rise (it has risen even more during July) exceeds by close to 60 percent the previous postwar high, an astonishing dimension that in itself some market historians would term an aberration. The grab-bag also contains impressive anecdotal evidence of excess: Amazon.com, the on-line book company which hasn't yet earned a dime, has a market value greater than long-established competitors. Coca-Cola sells at nearly 50 times earnings, more than three times its growth rate. Yahoo, the Internet company, has been selling at more than 100 times sales. To believe in a continuation of such things is to believe in a new era for stocks, and that's the problem confronting those who try to forecast the market. Experienced analysts fear being branded a new-era type. Belief in the onset of a new era, according to marketplace lore, is the kiss of death, the ultimate indicator of a market-top blowoff. New-era thinking suggests the naive, with no sense of history, are in the market. There is some evidence to defend the current period as a new era. You may cite, for example, the emergence of a stock-buying economic class, the urgency of couples to build their pensions, the great growth of mutual funds, and the electronic and information revolution. But, while the temptation exists to declare a new era, sound analysts know that norms reassert themselves. A broader perspective might show these times to have been not as extraordinarily different as we thought. And so, the dilemma, which forces reasonable, conservative, prudent analysts to issue cautionary advice while simultaneously acknowledging the power of new-era thinking. You can read evidence of it in the current issue of ''The Outlook,'' S&P's highly regarded newsletter. We are, it relates, ''in that euphoric stage where success fosters complacency and greed, and today's excesses may have to be paid for eventually.'' ''Nevertheless, with momentum strong, further gains seem likely. Keep 55 percent of your portfolio in stocks.'' .

To: Steve Lachance who wrote (11489)	7/23/1998 10:35:00 AM
From: umbro	Read Replies (1) \| Respond to of 164684

Steve, I'm trading this puppy, and as a rule don't 'talk my book'. Today looks like a bad day to trade ... too many mixed currents. Traders/owners need the long weekend ahead (and the media coverage that will obviously be in play) to mull over the past/future. Then maybe we'll see some consensus, or at least some intraday conviction. My guess is the trump card is going to be insider and employee options trading. There's about 6 mil. (per 10-Q, adjusted for split) employee options that can be exercised immediately, and in three/so days we should be in the "sell window". 6 mil. is a major percent of the float (which we're guessing is currently between 8 and 15 mil.). If the stock is to go down, there needs to be some 'natural sellers' (as opposed to 'nervous short sellers'), and if they come out of the woodwork, I don't think any momentum trader (or market maker) will stand in their way. Before the bears get too comfortable, AMZN is likely holding a few cards up its sleeve, and is just waiting for the day when the market and stock price is soft to step in with a well-timed announcement, or PR piece. My guess is that the insiders are more/less locked in, until AMZN turns a profit, which is two to three years out. If Bezos unloads earlier, he'll probably be subjected to all sorts of shareholder lawsuits. Figuring out what the VC's will do as an exit strategy is a lot more difficult to guess at. Maybe they'd like to do a private placement, and sell to another company or institution, but who will pay at the current quote (Softbank is probably tapped out :) ). I really want to see the audited 10Q, and the consolidated balance sheet of AMZN and the 3 cos. it acquired. Looks to me like AMZN paide a high price for their customer lists, but time will tell. At least hopefully, with the bond issue, and split, and acquisition, and approval of new shares behind AMZN (for now), it should be easier to understand AMZN's financials without a degree in financial archeology. A trader friend who doesn't follow AMZN closely had this to say about the AMZN announcement: ok .. it posted a penny more loss than expectations ... balance sheet has more twists and turns than a mountain road ... this looks more like an investment company than a book seller <g> ... there ya go. :)