AMZN Is The Stock Market Bubble Poster Child

Don’t take it from me, this is a comment that was emailed to me this weekend:

Druckenmiller thinks AMZN can raise prices anytime it wants. But its entire business model is based on price as a competitive advantage. The service is quick delivery, easy order. Well most of hte big companies have easy order on the web.  Also easy delivery if you are willing to pay for it. So what’s the competitive advantage? AMZN has just about everything?

I use Amazon less now that they have to charge sales tax of 7% where I am and 10% in Chicago/Cook County. As we have discussed Amazon is losing that advantage.

I think there is a big issue of just what is Amazons competitive advantage? If it’s price–they have to attack a litany of companies, all with bigger and better balance sheets. That war could take a number of years. When do shareholders of AMZN wake up and see AMZN is not making money while Walmart is making money and pays a 3.3% dividend to boot?

This is what the stock chart looks like of a company that is in extreme bubble mode.  Go back and lookUntitled at the stock charts of every single tech stock at the peak of the internet/tech bubble.   Need I remind anyone that the NASDAQ plunged over 90% when that bubble popped?

AMZN is going to go out of business, but its stock price has disconnected completely from the reality of its underlying business model.  Stanley Druckenmiller erroneously and foolishly added rocket fuel to the stock move with assertions that were 100% incorrect.  My updated report stock report goes over this in detail.   AMAZON dot CON.

Click on the image to access this report.  I am going to raise the price again after AMZN reports Q4 and its 2015 full year at the end of January.

From my update and full reports:   As we’ll see, it’s apparent that Druckenmiller had not done any of his own research on the Company. He was likely belching out the smoke some Wall Street salesman blew up his ass. He for sure did not dissect Amazon’s financial statements filed with SEC.

 

9 thoughts on “AMZN Is The Stock Market Bubble Poster Child

  1. As a businessman myself I´m very concerned about margins.
    If you have a huge revenue and a margin thinner than a leaf you will die if your revenue decreases.
    The circumstances all around the world at the moment is less sale everywhere and decreasing revenues even if you are a cheap online retailer.
    Amazons profits is a result of financial engineering and fraudelent accounting.
    It will be interesting to see how they are going to create “profits” now when the global economy and business is falling of a cliff.
    By the way I´m amazed to hear such stupid crap from a guy like Druckenmiller I have always considered him to be smart.

  2. I used to order from Amazon pretty frequently. However, since they started collecting Ohio sales tax a few months ago I hardly order anything. The absence of sales tax WAS their competitive advantage for me. When I do order it is typically from a re-seller of theirs who does not collect ohio sales tax. That 7% discount was their advantage.

    That said, those shorting the stock must be pulling their hair out. I thought the short made sense when the stock was in the mid 300’s. I’m glad I didn’t pull the trigger. The financial world seems completely upside-down and mispriced. Who knows how much longer it’ll continue.

  3. If I can’t tell immediately why a company is in business there must be something awry somewhere.

    I confess I’ve never bought a thing from Amazon. Perhaps it offers some cost advantage (free shipping, or something?) in the U.S. but elsewhere that is definitely not the case. But a company that allegedly sells everything usually ends up with an undefined market for undifferentiated merchandise. Look at McDonalds.

    I’ve heard that AMZN’s big sellers are CDs, DVDs, books and such…the very same slim portfolio of products, probably sold to the same teen- or twenty-something super consumers, that Ebay and other online retailers depend on. What would an age 50+ non-consumer buy from Amazon? Not a hell of a lot…

    Can’t see what all the fuss is about.

  4. I agree that scamazon and the homebuilders are pos, but what is your take on the junk/high yield bond etfs out there? Their charts look like they’ve broken to the downside. To me this is the biggest canary in the coal mine that I can see that this fake rally is doomed to failure.

  5. So with AMZN fighting in the trenches with the likes of WMT and TGT and Bed Bath, and who knows how many other sector retailers, how many years will it take AMZN to put the majority of them out of business so it can raise prices? 10 years? Whats the present value of money of a cash flow starting in 10 years. (at normalized interest rates and rois).

    Our entire system is out of whack-the current value of a company is the discounted cash value of cash flows plus terminal value (think AMZN started 19 years ago as a public company and Dave posted a cumulative chart of profits I think it was a couple of billion–add in another 10 years and you have to give credit to Bezos for hyping it as much as he did–of course it did not hurt that in addition to Druckenmiller, there are 2500 managers who invested their clients money on a long shot bet that paid off even though the company has not performed.

    That is still a profit unless you do not sell while its up in price. The short story does include the what if suddenly all 2500 managers/fund head for the exit at the same time.

    In reality, all AMZN and others have been is a momentum play

    1. Tell ya what. Why don’t you buy my Amazon stock report? There’s a whole section in there on capital management when short a stock like AMZN. That should answer your question. I did sell short some Nov 20 700-strike calls on Monday for $3. I’ll think about covering those tomorrow or I might see if I can ride them to zero. I have a section on using puts/calls in my report as well.

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