Amazons share price back in January this year was close to $400 a share, they’re now below $300 in the space of 5 months, why? They’ve brought out a new TV box, they’re investing like crazy in infrastructure, what’s the problem? I know in the first quarter they made some profit, but not as much as people expected.
So I’m at a bind here, is it a trick to make people sell their shares so people can reap the rewards of a later higher share price, or is it something else (Which would be more worrying) I’m planning to sell my shares in the next few months, but should I really just keep them for longer and see them as investment?
I’m planning on using them to pay off some debts, if the share price increases, obviously it covers the debts handsomely, I don’t have to pay them off right away and I can manage them, hence the question as to if it’s a good idea to see it as a long term investment.
Well for one, AMZN is currently priced at approximately 34x EBITDA (or a estimated annual cash flow). Most public companies trade in the 10-13x range. So on that proxy alone, AMZN is about 3x overvalued in relationship to other publicly traded companies.
If these types of metrics don’t make sense to you, then you probably shouldn’t be investing in equity securities.
But how come it’s been so overvalued for so long? Has that been due to manipulation of expectations by the company or just shareholders expectations? If what you’re saying is correct, is this the beginning of a trend to correct the share value to actual worth?
It’s hard to predict the future of any stock, and that’s especially true if tech stocks, even the more mainstream ones. Stick to the vpbasics and you can’t go wrong: buy low and sell high
Please tell me how you think the company is manipulating expectations. They report their financial results, which aren’t stellar, and they discuss their plans for their business, and for the most part they have followed through on those plans, they just aren’t that profitable.
Shareholder’s must perceive that sometime soon the company is going to have the stars align and the profitability is going to take off. But it really hasn’t for the last dozen years. In 2011, the stock price dropped in price about 30% as well, and then went on a tear appreciated about 130% over a two year period before the recent decline in value, which is almost 30% as well.
Amazon is one of those stocks whose pricing has never been based on the underlying fundamentals of future cash flow generation. It’s a bet that some sucker in the future will hope to value it more than you bought it at…a lot like professional sports team investing.
I don’t understand why people always ask for stock advice on these boards. Nobody has any clue whether you should sell your stock in the next few months or not. And if I DID know, I certainly wouldn’t tell anyone, because that would make the SEC unhappy with me.
Alibaba has been around about the same amount of time as Amazon. The Alibaba IPO isn’t going to somehow create new markets for Alibaba’s services that will encroach on Amazon. The IPO is about creating liquidity for its shareholders.
But you just had to let everyone know how irrelevant stock advice is in a thread about stocks, my advice to you is if that’s how you feel, then don’t bother with this thread.
I understood what he meant, but there’s nothing wrong in asking peoples opinions, I’m not asking for predictions of the future, I just want to know what’s going on with Amazon.
While that may or may not be true (IMO, it isn’t), are you saying that Alibaba having an IPO is somehow relevant to Amazon’s market share? Just the PR from the IPO leading to more business for Alibaba?
RE: The OP…
If the reason(s) you bought Amazon shares in the first place still hold, then so should you. And if it weren’t for the fact that you may soon need to liquidate some assets, you should probably even *consider *buying more, now that the market has provided you with a discount.
Amazon is a very large and very diverse company that is much, much, much more than a simple e-tailer. (I say that in a neutral way - not that it’s necessarily a pro or a con.) The market sometimes struggles with the valuation of companies that are so difficult to analyze, since there really aren’t any other companies to directly compare it to. There are divisions of the company that may be seen as over-performing, and others that may be seen as under-performing and creating drag on the more successful divisions.
Putting a valuation on something like Alibaba is fairly straightforward. Amazon, not so much. If Wall Street types had their way, they’d carve Amazon into a bunch of spinoffs so they could more easily and accurately put a value on each part. Obviously, Bezos prefers not to go that route. You *might *look at Amazon’s treatment by the market as a whole as a way of discounting Amazon’s “real” value based on that lack of clarity and resulting uncertainty. (Call it a “Bezos’ vision” discount.)
I hold no shares of Amazon or any of it’s main competitors, and nothing I’ve said was intended to say that Amazon is either overpriced or underpriced, because the fact is that I really have no clue.
Looking at what’s been going on with Amazon and investors the last several years is hardly making a prediction.
I think there are two main Amazon-specific factors (and a ton of lesser ones).
Amazon’s business model is growth. Get bigger and bigger. Forget profits, plow revenue into growing.
This can only go on so long. A few of Amazon’s divisions aren’t growing much, if at all. Most famously, Kindle. This makes investors nervous about the sustainability of other divisions. (And their cloud services could be viewed as overpriced, and therefore not going to keep up, to some.)
Greater fool issues. Who cares about profits, income/share, etc. if you think someone else is going to buy the stock for more later? You just have to “time it” to get out. Some people clearly think that time is now.
And one main non-Amazon specific one:
The Tech Bubble 2.0 is bursting. The more overvalued for a longer time a tech company has been, the more likely it will fall.