KW: This is discussion from two commentary sources, Paul Craig Roberts and Agora Financial articles are reproduced here. Make up your own mind as to whether this companies share price is realistic or not, interesting that both commentaries have a negative slant.
First PCR
“Here are today’s top stories on Bloomberg”
“Jeff Bezos briefly overtook Bill Gates as the world’s richest person. A surge in Amazon shares Thursday morning in advance of its earnings report gave Bezos a net worth of $92.3 billion, surpassing the Microsoft founder’s $90.8 billion fortune. In afternoon trading, Bezos remains ranked second on the Bloomberg Billionaires Index. Gates has held the top spot since May 2013.”https://www.bloomberg.com/news/articles/2017-07-27/bezos-surpasses-gates-as-world-s-richest-ahead-of-amazon-results?cmpid=BBD072717_BIZ&utm_medium=email&utm_source=newsletter&utm_term=170727&utm_campaign=bloombergdaily
Amazon’s stock closed yesterday at $1,046 per share. Amazon’s profits do not support this extraordinary price. Apple, a very profitable company, has a share price of $150.56, an overprice itself.
What or who is making Bezos so rich from an online sales company? Note, amazon.com is just sales. It is not some new manufacturing technology that produces valuable output at low cost. amazon.com is what Walmart, Sears, and Macy’s do, the difference being that amazon.com is online and Walmart, Sears, and Macy’s are in physical locations where real merchandise can be experienced hands on and tried on for fit.
In other words, online purchases are convenient, but you don’t know what you are getting. Does it fit? What is the quality? And so forth. How many times do you send it back before you get what you want?
There are two answers to the question about who is making Bezos rich.
Now Agora Financial
Jeff Bezos’ reign as the world’s richest man lasted all of a few hours.
When we left you yesterday, Bezos had leapfrogged Bill Gates to the top of the Bloomberg Billionaires Index, based on a jump in Amazon’s share price. But AMZN reported earnings after the closing bell — and whiffed badly. The Street was counting on profits of $1.42 a share. Instead, they were only 40 cents. As we write this morning, AMZN is down 3% and Bezos’ net worth has been knocked down to $89.3 billion.
The company is embarking on “a phase of heavy investment in areas such as building warehouses, producing films and setting up data centers,” says the Financial Times.
As if that’s some kind of shock? C’mon, this has been Amazon’s MO from the get-go. It’s right there in Bezos’ annual letter to Amazon shareholders 20 years ago: “Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity and correspondingly stronger returns on invested capital.”
The key phrase there is “returns on invested capital.” As we said a few days ago, Bezos is forever plowing Amazon’s profits into research and development, looking for some new line of business he can dominate.
Our old friend Chris Mayer says if you backed R&D out of Amazon’s numbers, it would routinely generate profit margins of 10%. Instead the idea is to keep growing revenues — relentlessly.
That said, are Amazon’s revenues all they’re cracked up to be?
This is the Amazon story the mainstream is overlooking. We hinted at it on Monday. A group called Consumer Watchdog issued a comprehensive study that claims many of the discounts listed on Amazon’s website are bogus.
That’s not new: For years, Amazon was called out for posting bogus “list prices” that led you to believe you were getting a bargain when you weren’t. The company abandoned the “list price” terminology last year, only to adopt similar ruses like a “previously was” price. Consumer Watchdog called attention to these new practices in a report issued three weeks ago.
For instance, check out the “price” and the “sale” here:
Consumer Watchdog says in 97% of instances where this terminology appears, the reference “price” was higher than any price Amazon had charged in the previous three months.
In theory, the Federal Trade Commission does not look kindly on such practices. But Amazon has largely gotten a pass; only bad publicity has reined in the company, and as you just saw, the company can be very resourceful in finding alternative ways to achieve the same result. (It also says Consumer Watchdog’s research is “deeply flawed.”)
Key point: Consumer Watchdog submitted its report to the FTC. The agency will take it into account when reviewing Amazon’s proposed takeover of Whole Foods.
Back to PCR
One is that Wall Street is betting that the collapse of US anti-trust law and regulatory authority—it is still on the books but not enforced, just look at the Big Banks—and the ability of Bezos to use his ownership of the Washington Post, the newspaper of the country’s capital, to support those who support him, ensure that amazon.com will be an online monopoly. Once this is put in place, amazon’s prices and profits will rise, and the extraordinary amazon.com P/E ratio will come into line with reality.
Another is that Bezos’ cooperation with Washington’s spy network over all Americans is paid for by the CIA’s many front companies driving up the price of amazon.com’s stock. As the price of amazon.com rises, so does Bezos’ wealth.
I don’t know that either of these answers is correct. What I notice is that Bill Gates who heads the largest digital technology company is on occasion second fiddle to Bezos who heads an online Sears or Macy’s.
Apple with a share price of $150 earned $52.9 billion during the second quarter of 2017. Earnings per share were $2.10.
Amazon.com earned $38 billion. Earnings per share were 40 cents.
Why is amazon.com’s price $1,046 per share and Apple’s price is $150.56 per share.
Apple’s earnings per share are 5.25 times higher than amazon’s, but amazon’s stock price is 6.9 times higher than Apple’s. What explains this?
The free market answer is that amazon.com, a company that sells other companies’ products, is more promising than a high tech leading manufacturing company of our time.
Does that make sense to you?
Keep in mind that it was Bezos’ government propaganda sheet, the Washington Post, that gave credibility to the shadowy organization, PropOrNot, an entity better hidden than an offshore money laundering operation, that produced a list of 200 truth-tellers which it libeled as “Russian dupe/agent.”
Monopolies are inconsistent with free market capitalism and with democracy. Monopolies and government bond together to create fascism.