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Does anybody on here cover the retail industry?

I'm looking into buying AMZN long-term, and after looking into the financial statements, it's obvious why their margins are so small, and I agree with why they are keeping their prices so low. There's still an incredible amount of business for them to snatch up, and larger retail competitors like TGT and WMT are freaking out, and trying to keep up with price matching, shifting their focus to ecomm, etc.

I see Amazon, along with supply chain service companies like UPS, taking over the world here in the near future. Are there any other plays here? Will mostly likely buy after a 5% market pullback.

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Comments (12)

  • Hooked on LEAPS's picture

    A little late to the party?

    Competition is a sin.

    -John D. Rockefeller

  • Boothorbust's picture

    I think you need to think about how much of your investment thesis is already priced into AMZN. Is your prediction of their growth and dominance different from market consensus? If not then you may be right in your prediction but it's not going to make you any money. AMZN trades at big multiples already, so you have to have a good reason for thinking it's undervalued at the current price.

  • In reply to BTbanker
    subrosa's picture

    BTbanker:
    Hooked on LEAPS:
    A little late to the party?

    I'm specifically thinking 10-20 years down the line.

    The party hasn't even started yet when you think about the competition, and where Amazon can still go from here.

    It's obviously a great company that's just going to take more and more market share from brick and mortar retailers. It's incredible that they were basically unchallenged for so long. Really anyone could have competed with them 4 or 5 years ago. They have since put up infrastructure that makes competition on a large scale nonexistent. A lot of the growth is obviously priced in, but there definitely is additional room to grow. It just may not be overly attractive at its current valuation. I've never really followed it too much, but aren't certain states kind of picking on them with taxes. I thought I remembered reading where a couple of states were going to tax items purchased through Amazon but not smaller competitors like Overstock.com. I could be wrong and I have no idea if it would even be that big of a deal, but I would be concerned about similar actions coming in the future however unlikely.

  • In reply to Boothorbust
    BTbanker's picture

    Boothorbust:
    I think you need to think about how much of your investment thesis is already priced into AMZN. Is your prediction of their growth and dominance different from market consensus? If not then you may be right in your prediction but it's not going to make you any money. AMZN trades at big multiples already, so you have to have a good reason for thinking it's undervalued at the current price.

    You're right that it looks very overpriced, especially looking at the graph, but I think the reason for that is they haven't put much effort into profit maximization yet, so their multiples are out of wack. They're still trying gain market share in the online retail space, and once people realize the online shopping experience is better, they can then focus on raising their margins.

    Remember when we all thought that Apple was too expensive at $100? Well, at least I did, and I never bought a single share because of that.

  • In reply to BTbanker
    bonobochimp's picture

    BTbanker:
    Boothorbust:
    I think you need to think about how much of your investment thesis is already priced into AMZN. Is your prediction of their growth and dominance different from market consensus? If not then you may be right in your prediction but it's not going to make you any money. AMZN trades at big multiples already, so you have to have a good reason for thinking it's undervalued at the current price.

    You're right that it looks very overpriced, especially looking at the graph, but I think the reason for that is they haven't put much effort into profit maximization yet, so their multiples are out of wack. They're still trying gain market share in the online retail space, and once people realize the online shopping experience is better, they can then focus on raising their margins.

    Remember when we all thought that Apple was too expensive at $100? Well, at least I did, and I never bought a single share because of that.

    How do you substantiate that they "haven't put much effort into profit maximization yet"? This is a giant company - I would think getting the highest margins they can would be a top priority. Is there any upcoming catalyst that you see raising the margins besides that they'd 'try harder'? I'm not an expert on online retail, but aren't margins thin throughout the industry?

    And I don't think there's much more for people to realize about the benefits of online shopping. We're not in 1995 anymore...

  • In reply to bonobochimp
    BTbanker's picture

    bonobochimp:
    BTbanker:
    Boothorbust:
    I think you need to think about how much of your investment thesis is already priced into AMZN. Is your prediction of their growth and dominance different from market consensus? If not then you may be right in your prediction but it's not going to make you any money. AMZN trades at big multiples already, so you have to have a good reason for thinking it's undervalued at the current price.

    You're right that it looks very overpriced, especially looking at the graph, but I think the reason for that is they haven't put much effort into profit maximization yet, so their multiples are out of wack. They're still trying gain market share in the online retail space, and once people realize the online shopping experience is better, they can then focus on raising their margins.

    Remember when we all thought that Apple was too expensive at $100? Well, at least I did, and I never bought a single share because of that.

    How do you substantiate that they "haven't put much effort into profit maximization yet"? This is a giant company - I would think getting the highest margins they can would be a top priority. Is there any upcoming catalyst that you see raising the margins besides that they'd 'try harder'? I'm not an expert on online retail, but aren't margins thin throughout the industry?

    And I don't think there's much more for people to realize about the benefits of online shopping. We're not in 1995 anymore...


    The U.S. Census Bureau numbers show online retail sales growing 20% YoY. That's pretty damn incredible considering we're in '2013' if that has anything to do with it... I got the "Amazon doesn't care about max profit" directly from Jeff Bezos. You're right that retail industry profit margins are shit (avg 5% or so), but you have to think about the millions of employees and thousands of stores and distribution warehouses Walmart has to pay for. I just think Amazon is well positioned to make a huge move in the shifting retail industry. They have no brick-and-mortar stores and fewer employees, plus with advancements in tech and energy, I expect shipping costs, their largest expense, to gradually decrease.

    I haven't done too much research on this, but from what I've gathered, I'm pretty confident it's a good long-term play.

  • In reply to BTbanker
    andres17's picture

    BTbanker:
    Boothorbust:
    I think you need to think about how much of your investment thesis is already priced into AMZN. Is your prediction of their growth and dominance different from market consensus? If not then you may be right in your prediction but it's not going to make you any money. AMZN trades at big multiples already, so you have to have a good reason for thinking it's undervalued at the current price.

    You're right that it looks very overpriced, especially looking at the graph, but I think the reason for that is they haven't put much effort into profit maximization yet, so their multiples are out of wack. They're still trying gain market share in the online retail space, and once people realize the online shopping experience is better, they can then focus on raising their margins.

    Remember when we all thought that Apple was too expensive at $100? Well, at least I did, and I never bought a single share because of that.

    BTbanker,

    Apple was not that expensive at $100 back in 2007. The valuations was in line with how fast they were growing back then. Amazon is a terrible investment in my opinion. The current valuations is too optimistic. I wonder what will happen once Amazon starts charging sales tax. It is a great company, but it is definitely overpriced at $270.

  • The Phantom's picture

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