Down 10%?
That's right, Amazon (AMZN) is down about 10% from that big post-market spike it took to 3,650 on 4/29 on the release of their earnings. Despite earning $27Bn in the past 12 months (through 3/31) it's hard to rationally support a market cap of $1.85Tn at 3,600 as that's 68 times those earnings and those earnings came in a year which was perfecft for Amazon, with everyone staying home (with Government checks) and ordering on-line for an entire year. In all likelihood, this may simply be as good as it gets for AMZN.
Expectations for 2021 are for another $27Bn to be put in the books at AMZN but I'm betting they miss those targets as people begin going outside again in the second half of the year. Whatever the case, it's all about trade-offs and sales at AMZN's Whole Foods were off 16% last year – despite the fact that people still eat food. In fact, had not Prime Moved up to a record 200M Members in 2020 – AMZN would not have had an earnings beat at all as Prime Revenues are now $25.2Bn, accounting for almost 100% of the company's profits (much like Costco).
Like Tesla (TSLA) trading Bitcoins, it should bother you when the company you invest in doesn't actually make money doing the thing they're supposed to be doing – like selling cars or selling merchandise. Bezos and Musk have the same problem as neither one of their core businesses is inherently profitable that way Microsoft is with software or Google and Facebook are with selling search ads. Investors tend to treat them all the same and that's why you have these insane P/E ratios for AMZN (68x) and TSLA (686x) but more normal ones for MSFT (34x), FB (27x) or GOOGL (31x). Investors are trying to put the square pegs on the round holes…
Part of it is from lazy, poor valuation models that tend to treat all stocks in a sector like they are the same and that's very much in line with the very poor quality of analysts these days. Most people get their market analyst for free these days and that advice tends to come from bloggers who have no particular qualifications whatsoever but even the "professional" analysts generally suck – even the…
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