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

To: Miguel Octavio who wrote (30387)	12/17/1998 8:34:00 PM
From: nlam	Respond to of 164684

Have been watching the action in this stock for the past week, Now I'm just wondering if everybody on this thread is rich yet??? $400 price target in 3-5 years???? Who is this guy fooling lowballing the price??? $40,000 or BUST!!!!

To: Miguel Octavio who wrote (30387)	12/17/1998 8:43:00 PM
From: JC Reddy	Read Replies (2) \| Respond to of 164684

Why this bubble will burst! One day this bubble will burst. The question is who is going to be holding the empty bag? 10 Billion revenues in five years. May be. $10/share? We don't even know how many shares are going to be there. There is going to be a lot of dilution - AMZN needs money! They cannot keep on taking losses. Even assuming there is no dilution, that puts the total profits of about $500 million (approx. 50 million shares outstanding). So, that is 5% profit margin. Now how many retail stores have 5% profit margin? Currently AMZN has -21% margin. Wal-Mart with all its superior supply-chain management has a margin of about 3.2! Every household knows about Wal-Mart and it the best run retail store. Let's discuss a bit more about margins. When I do shopping for a specific thing, I go around searching for the cheapest. I guess all of us do. How hard is it to search for something on the net? Well, Macy's is next to my house, but I drive down all the way to an outlet mall to buy something at cheaper price. I drive down a mile to fill gas at CostCo for $1/gallon since I don't want to pay $1.25 at the nearest Shell. Searching on the net is a lot easier, don't you think? What are the barriers to entry here to prevent competetion? Well, it is hard for me to compete with Walmart because I need a HUGE capital to set up shops, warehouses and develop a supply-chain. Starting something like AMZN is very involved and expensive, I agree, but still a lot cheaper than competing with Wal-Mart. AMZN might become the greatest online shop, but there will be thousands of online shops. Nike will sells its own shoes. SONY will sell its own TVs just like DELL sells its computers. There will be a lot of speciality shops all over (CDNow, BYND, etc.). There are many online bookstores that sell for cheaper prices. Alright, AMZN is the most well known, but would you always buy your book at Barnes and Noble if your friend tells you he got it cheaper else where? I don't think so. That's what will happen. As the net matures, people will get to know where to buy what. In a new city I go to Macy's to buy my dust bin, but in my native town I know where to buy it cheap. My friends, the Net is going to be native to everyone. I don't have loyalty to a particular web address. And that will bring down the prices of everything. Consumer is the winner. The margins will shrink, doesn't matter how efficiently you run your business, someone else will try to beat you. All the BS about digital delivery increasing margins isn't worth it. You cannot deliver my teddy bear digitally. As a matter of fact, it costs $5 to send it to me which I may want to buy from a local store. Digital delivery of books is an interesting idea if we ever reach there, but there too you will have an immense competetion. I love Amazon and it is a pioneer in Electronic commerce. They will do very well, no doubt. They probably are developing technologies that'll make their supply chain efficient. Their shop-the-web (from Junglee's technology) is good, but not unique (YHOO has that as well). AMZN is a growth company, I give that. But the growth is limited and it should be valued just like any other company since it isn't unique in any sense. Let's say a growth rate of 150% and let's give a P/E ratio of 300. Get the idea? My main point is AMZN is a distribution channel, not a manufacturer of unique products. If they are efficient, they may have good margins. But my friend, there are going to be tons of competetors bringing down those margins. And competetion is universal on the Net. There is no monopoly there. Just the way Internet makes it easy to reach billions of buyers, it also allows buyers to reach millions of shops. AMZN isn't MSFT with monopoly and a technology base that cannot be thrown away. It isn't a drug company with patents to let it enjoy the protection for a couple of decades. AMZN, my friend, is a shop, perhaps a good one. Are there any other business models for AMZN? Are they going to be a technology company? Are they going to be a shopping directory? Finally, Let's say they will have $10/share profit in five years (which is very unlikely). Let's say they will maintain an explosive growth rate of 70-80% in the future as well. Let's say a P/E of 100. What's the price? $1000/share in five years (that's already about 60 Billion market cap). That's a triple from here. The stock appreciation of about 25% per year. And what's the basis for $400 target? Go figure. It's easy to paint a rosy picture and be very aggressive in predictions. That's like saying if I invent a medicine that lets you live forever..... Not going to happen. Analysts are supposed to provide cautious guidance in selecting investments, not to encourage gambling for seemingly selfish motives. I laughed at it when an analyst put a target of $150 for EBAY because his earlier target of $90 was reached too soon. That's the level of thinking these braindead analysts are capable of. They are the shepherd and we are the sheep. This bubble will burst. It's only a matter of time. All comments are welcome. - JC

To: Miguel Octavio who wrote (30387)	12/17/1998 9:02:00 PM
From: Yikes	Respond to of 164684

<< I think Cohen did a poor job, he only mentioned books and their low margins, that is not all Amazon is today and is certainly going a lot more new places from here. Blodget did say you had to believe that the company will become THE place to shop or something like taht. It it is only books Cohen is right, but he is wrong on that. I think it is expensive, but is not just books like Cohen said (That is all he talked about) >> Cohen said more. He said, it's wrong to think AMZN is going to be the WalMart of Internet. For one, the profit margin is still only around 5-6% for any retailer, not the 10% or so that Blodget used in his evaluation. Secondly, none of the traditional retailers will sit by idly while AMZN builds its customer base. Barnes & Nobel is catching up. Last week Victoria Secret opened its on-line store. Here is another point. AMZN spends so much on advertising. What if a retail company opens up a on-line store and advertises it using its own media channel? For example, all bags from the Gap store now have "www.gap.com" printed on them. That's FREE advertising. Let's imagine all stores do that. Where does it leave AMZN? You guess it, spend even more on advertising. Cohen also said, AMZN is spending $1 on advertising and customer acquisition for every $.70 earned. It sounds to me more like a Pyramid scheme than business model.