Amazon's Record Sales Sends Stock Plummeting
Amazon reported their highest ever quarterly profit but the announcement was not well received, causing a 13% sell of in the stock immediately after the announcement.
Amazons full-year sales surpassed $100 billion for the first time in its history. And it’s still growing sharply: sales in the 4th quarter were 22% higher than the same quarter in 2014.
Amazon is ranked as the worlds third most valuable company based on market cap but until last year it had never actually made a profit. Instead, Amazon would re-invest all its money in order to fund future business lines - which is precisely how they got their cloud computing business started which is hugely successful now.
Investors were not so disappointed that Amazon missed their estimates because they reinvest the money in future business lines but they were more disappointed at the news that it has once again decided to take on more cost.
Much like Amazon's cloud computing business which has taken off, they also experienced high growth in their Amazon Prime service which increased by 50% in 2015. Amazon's growth is not going unnoticed, especially by big box retailers such as Macy's and Wal-Mart who are trying desperately to keep up by upgrading their e-commerce platform.
Investors expect a lot from Amazon and this expectation is priced into the stock. When the company fails to deliver the stock gets hit hard but the fact that it reinvests its money into future business lines may be seen as a good move for the future - I feel that in the near future this slight doubt may weigh on the stock price.
What do you guys think? Where do you see the stock going in the near future?
When your CEO decides to start a streaming service with the pedigree and quality of Netflix to just "get more people to buy toilet paper" I think you're dealing with an entirely different beast all together.
Fundamentally, Amazon is only becoming more valuable. It has a long-standing history of reinvesting its money, as you highlighted, in future business lines and it has its successful AWS line, for example, to show for it. Still, I wouldn't put my money into it just yet, because I think it'll continue to be hammered for another 5-7% before it looks cheap again.
It's trading at 500x P/E
And since when has P/E been a good measure to use on Amazon...
I never said that - I'm only responding to your comment on "5-7% selloff before it looks CHEAP"
"this slight doubt may weigh on the stock price"
as in, THE narrative is played around the fact that operations won't eat into margins given a diminishing capex (scale finally showing its results) and all that. sure AWS got analysts' pants on fire with op margins and beastly revenue growth but if there is a sector where nobody really knows who the winners will be, is the cloud sector as the rate of expansion is so extreme (also, did I not mention that Capex is likely to be piercing the sky for this unit so cash flow conversion could be much poorer than imagined).
it's not a slight doubt. it's make-it-or-break-it component of the thesis
Once AMZN gets back down into the 300's, time to start loading up the truck IMO.
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