# Why are Amazons shares doing so badly? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [May 8, 2014, 7:34pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999 "2014-05-08T19:34:21Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Telemark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/telemark/32/372_2.png) [@Telemark](https://boards.straightdope.com/u/Telemark)\ **Post date:** [May 8, 2014, 9:08pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/21 "2014-05-08T21:08:03Z")
> [@Dewey\_Finn](#): > > I don’t see that. Is Alibaba going to invest in the warehouses and other infrastructure to satisfy US customers? Amazon is hoping to expand into other markets, and they’ll have to compete with a well funded Alibaba. And yes, they probably will invest heavily in the US. > [@Ryan\_Liam](#): > > The thing is though, I recevied them when they were at $313 last year, they are now at around $288 and dropping… What you bought them at is irrelevant, don’t concern yourself with that (except to deal with capital gains/losses). The price of the stock today and where you think it’s going are important. The price you bought it for is unimportant history. ---
**Author:** ![Ryan\_Liam](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ryan_liam/32/3965_2.png) [@Ryan\_Liam](https://boards.straightdope.com/u/Ryan_Liam)\ **Post date:** [May 8, 2014, 9:11pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/22 "2014-05-08T21:11:38Z")
> [@](#): > > **ftg** > > 1. Amazon’s business model is growth. Get bigger and bigger. Forget profits, plow revenue into growing. I am definitely not saying they are the same, but whenever this is mentioned I am always reminded of Worldcom 😛 ---
**Author:** ![Tully\_Mars](https://avatars.discourse-cdn.com/v4/letter/t/7ab992/32.png) [@Tully\_Mars](https://boards.straightdope.com/u/Tully_Mars)\ **Post date:** [May 8, 2014, 10:12pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/23 "2014-05-08T22:12:12Z")
Ooooh! I have the answer. It’s simple. It’s going down and it will continue to go down - because I bought some. At times, I’ve considered starting an online subscription service where I tell subscribers which stocks I’ve purchased - so they can do the exact oppposite. ---
**Author:** ![Shalmanese](https://avatars.discourse-cdn.com/v4/letter/s/45deac/32.png) [@Shalmanese](https://boards.straightdope.com/u/Shalmanese)\ **Post date:** [May 8, 2014, 10:53pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/24 "2014-05-08T22:53:01Z")
Sell all your Amazon shares today and dump it all into an index fund. As a small time investor, the best thing to do is to become completely price insensitive. Just take money out when you need it and put it in when you have some extra and completely ignore what the market looks like at the moment. Anything else is gambling, not investing. Unless you have any special knowledge of the market, a price of $288 today means an expected value (EV) of $288 a year from now and $288 10 years from now and $288 1000 years from now. If it was anything but that, then that knowledge would be priced in. Think about it this way, imagine you’re forced to enter a rock, paper, scissors tournament with a crowd of RPS experts. The best strategy you can hope for is to play completely randomly and break even. If you attempt any kind of strategy, you introduce predictability and you’ll lose more than you win. ---
**Author:** ![Dangerosa](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Dangerosa](https://boards.straightdope.com/u/Dangerosa)\ **Post date:** [May 8, 2014, 11:08pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/25 "2014-05-08T23:08:23Z")
Amazon is a long play. Its a hold it for 20 years because you believe they will take over the world stock. And in that scheme of things, you don’t worry about a single year performance. ---
**Author:** ![Baron\_Greenback](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/baron_greenback/32/48_2.png) [@Baron\_Greenback](https://boards.straightdope.com/u/Baron_Greenback)\ **Post date:** [May 8, 2014, 11:18pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/26 "2014-05-08T23:18:28Z")
> [@Dangerosa](#): > > Amazon is a long play. Its a hold it for 20 years because you believe they will take over the world stock. And in that scheme of things, you don’t worry about a single year performance. Agreed. Have they ever paid a dividend? They want to be fundamental infrastructure for the future of all kinds, I think, and they are doing well there. ---
**Author:** ![racepug](https://avatars.discourse-cdn.com/v4/letter/r/f1d935/32.png) [@racepug](https://boards.straightdope.com/u/racepug)\ **Post date:** [May 8, 2014, 11:31pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/27 "2014-05-08T23:31:04Z")
I worked for a division of Amazon - Amazon Fresh (or as I and others who worked there liked to call it, “Amazon NOT-so-Fresh”) for a few weeks before I got my current job. Absolutely nothing good do I have to say about it. Trust me on this - if labor laws had never been enacted Amazon is the kind of place that would insist you work 18-hour days without any breaks (or days off) and if you didn’t want to comply would kick your butt to the curb and go look for another sucker. I used to buy items from Amazon on occasion before my brief time working for them (or, more correctly, for a contractor hired by them) but I haven’t been inclined to even visit their website, let alone actually PURCHASE anything through them, since I was unceremoniously let go by them (not that I was exactly crying about that). I know many people purchase items from them but if their shares went to $0, after my experience working in one of their warehouses, it wouldn’t bother me in the least. ---
**Author:** ![JRDelirious](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jrdelirious/32/9531_2.png) [@JRDelirious](https://boards.straightdope.com/u/JRDelirious)\ **Post date:** [May 9, 2014, 12:20am UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/28 "2014-05-09T00:20:34Z")
> [@voltaire](#): > > 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. > [@Dangerosa](#): > > Amazon is a long play. Its a hold it for 20 years because you believe they will take over the world stock. And in that scheme of things, you don’t worry about a single year performance. Yes, this bears keeping in mind. If Amazon were simply “the outfit that ate out bricks-and-mortar bookstores”, it conceivably could have evolved into a moderately profitable enterprise that would not score as ludicrously overvalued by the conventional metric… and would be now nervously looking over their back to see if some “new kid on the street” is coming to do unto them as they did unto others. But that is not what it is or was intended to be. ---
**Author:** ![Dangerosa](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Dangerosa](https://boards.straightdope.com/u/Dangerosa)\ **Post date:** [May 9, 2014, 12:26am UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/29 "2014-05-09T00:26:25Z")
> [@Baron\_Greenback](#): > > Agreed. Have they ever paid a dividend? They want to be fundamental infrastructure for the future of all kinds, I think, and they are doing well there. No, they don’t pay dividends, nor do they intend to. I think they are about to eat Netflix for lunch… ---
**Author:** ![Crafter\_Man](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/crafter_man/32/458_2.png) [@Crafter\_Man](https://boards.straightdope.com/u/Crafter_Man)\ **Post date:** [May 9, 2014, 1:06am UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/30 "2014-05-09T01:06:17Z")
If the share price is low, then it’s time to buy… ---
**Author:** ![ftg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ftg/32/2801_2.png) [@ftg](https://boards.straightdope.com/u/ftg)\ **Post date:** [May 9, 2014, 3:56pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/31 "2014-05-09T15:56:20Z")
> [@Ryan\_Liam](#): > > I am definitely not saying they are the same, but whenever this is mentioned I am always reminded of Worldcom 😛 I think this might be part of what investors are thinking. There have been a lot of infamous companies with a “growth only” business model. Wall Street might be thinking it’s time for Amazon to shift business models. ---
**Author:** ![Omar\_Little](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/omar_little/32/269_2.png) [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)\ **Post date:** [May 9, 2014, 3:57pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/32 "2014-05-09T15:57:47Z")
> [@Crafter\_Man](#): > > If the share price is low, then it’s time to buy… Yeah, but it’s not. From a financial metric standpoint compared to other companies, it’s about 3x overvalued. ---
**Author:** ![GreenElf](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@GreenElf](https://boards.straightdope.com/u/GreenElf)\ **Post date:** [May 10, 2014, 4:50am UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/33 "2014-05-10T04:50:56Z")
The demise of Amazon began rather quietly a couple years ago when I had a less than satisfactory customer service experience with them over the phone. Since then, I stopped buying much from them to show them how mad I was at them, so now as their stock tumbles, I think they may have some inkling of regret about how they handled that phone call. Sorry about your shares, dude. ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [May 10, 2014, 10:30pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/34 "2014-05-10T22:30:28Z")
Whether it is priced low or overpriced is completely dependent on what you think its future earnings growth rate will be. For the current price to be considered low you’d have to believe that it is going to have an amazing growth rate. Moderate, even strong, growth does not support its PE ratio of 458. For some reason people did believe that future growth rate was probable last year, hence they paid that much for it. Now they don’t. If they were right then and wrong now it is cheap. If some are still overestimating future growth then it is overpriced. For comparison - Google’s PE is 28 and Apple’s is 14. ---
**Author:** ![RaftPeople](https://avatars.discourse-cdn.com/v4/letter/r/6f9a4e/32.png) [@RaftPeople](https://boards.straightdope.com/u/RaftPeople)\ **Post date:** [May 11, 2014, 3:59pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/35 "2014-05-11T15:59:34Z")
> [@Dewey\_Finn](#): > > I don’t see that. Is Alibaba going to invest in the warehouses and other infrastructure to satisfy US customers? Isn’t it possible to take sales from Amazon without investing in distribution infrastructure? I wasn’t aware of Alibaba until this thread, so I just did some reading about their model. One of the nice things about it is that they don’t have to build all the infrastructure, they can let everyone else worry about that and/or take advantage of all of the existing facilities (3pls, etc.) I see that as a good thing (for them), it allows them to just setup a bunch of drop ship arrangements (get some inventory feeds, send out orders, get a percentage). ---
**Author:** ![Shalmanese](https://avatars.discourse-cdn.com/v4/letter/s/45deac/32.png) [@Shalmanese](https://boards.straightdope.com/u/Shalmanese)\ **Post date:** [May 11, 2014, 10:52pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/36 "2014-05-11T22:52:42Z")
> [@RaftPeople](#): > > Isn’t it possible to take sales from Amazon without investing in distribution infrastructure? Alibaba is being listed on a US stock exchange but has no plans for any US expansion, as is made clear in their prospectus. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [May 12, 2014, 1:13pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/37 "2014-05-12T13:13:56Z")
> [@Omar\_Little](#): > > 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. These two paragraphs contradict each other - and I agree with the first. Shareholder perception “that sometime soon the company is going to have the stars align and the profitability is going to take off” is “the underlying fundamentals of future cash flow generation”. I suspect you mean that you personally think these expectations are unrealistic, and I also suspect you’re right. But that doesn’t mean the people who hold these expectation are betting on some future sucker. What they’re betting on - as you note earlier - is future profits. What’s worth noting is that companies whose price is based on future growth can be more subsceptible to price fluctuations than companies whose price is based on current profits and low growth. This is because expectations about future growth are highly speculative, and because the magnitude of changes in the estimates are amplified by compounding. (Meaning that the value of a company is more impacted by changing the annual growth estimate from 30% to 10% than by reducing profits 20%.) ---
**Author:** ![Omar\_Little](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/omar_little/32/269_2.png) [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)\ **Post date:** [May 12, 2014, 1:21pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/38 "2014-05-12T13:21:02Z")
> [@Fotheringay-Phipps](#): > > These two paragraphs contradict each other - and I agree with the first. Shareholder perception “that sometime soon the company is going to have the stars align and the profitability is going to take off” is “the underlying fundamentals of future cash flow generation”. > > I suspect you mean that you personally think these expectations are unrealistic, and I also suspect you’re right. But that doesn’t mean the people who hold these expectation are betting on some future sucker. What they’re betting on - as you note earlier - is future profits. > > What’s worth noting is that companies whose price is based on future growth can be more subsceptible to price fluctuations than companies whose price is based on current profits and low growth. This is because expectations about future growth are highly speculative, and because the magnitude of changes in the estimates are amplified by compounding. (Meaning that the value of a company is more impacted by changing the annual growth estimate from 30% to 10% than by reducing profits 20%.) The market is betting on some future stars aligning. I don’t believe that it will happen as it is not based upon any projections that the company has made, but by Wall street analysts that need to project to support the stock price that many of their funds hold. Amazon is not a start-up or development stage company. There is no financial metric to support the valuation multiples it is currently priced at. ---
**Author:** ![Omar\_Little](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/omar_little/32/269_2.png) [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)\ **Post date:** [July 25, 2014, 3:44pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/39 "2014-07-25T15:44:57Z")
AMZN traded down today 11% to $318.84 per share, based upon actual Q2 losses being about double what analyst projected. Q3 losses are being projected by the company to be even larger. Most of this is due to the recent roll out of the Fire phone. Yet it still trades at an astronomical multiple compared to its peers, based upon this magical view that profits will someday come. ---
**Author:** ![buddy431](https://avatars.discourse-cdn.com/v4/letter/b/6a8cbe/32.png) [@buddy431](https://boards.straightdope.com/u/buddy431)\ **Post date:** [July 25, 2014, 4:29pm UTC](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999/40 "2014-07-25T16:29:03Z")
Tech stocks in general trade at a higher price to earnings ratios than is typical (though Amazon is high even for tech stocks). Will this persist into the future? I don’t know, but I sure don’t buy tech stocks (except as parts of index funds). Historically (which is not always indicative of future performance) it is the stocks with lower PE that (slightly) outperform the market. [Previous page](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999.md?page=1) [Next page](https://boards.straightdope.com/t/why-are-amazons-shares-doing-so-badly/687999.md?page=3)