They whiffed on the quarter and guided lower. Revenue Growth is decelerating and losses continue. They really don’t seem to give a hoot about investors at this point. The is Bezos’ petri dish of wonderful consumer services. I love the service. The only problem is that they don’t make any money and they never will unless they want to slow revenue growth way down. Cash flow is clearly a problem as they have $800 million less in cash on the balance sheet compared to Q3 last year. Operating cash flow is a mirage because it is mostly float from their vendors. As their growth slows the float available to them decreases as well. The myth of self financing is coming to an end. I suspect they will be using that $2 billion line of credit this holiday season to help them finance inventory.
The CFO leaving is really the key here. He knows Bezos is stubborn and that he thinks its business as usual. They have some of the worst financial disclosure on the street and the meme of deferring profits to invest in the future is total nonsense. If the street actually understood accounting they would realize that investments are capitalized and depreciated over time and therefore you should be able to show a profit. Walmart had 3% margins during their hyper-growth capex phase. There were somehow able to make a profit. So the question remains why can’t Amazon make a profit? The answer is: they are selling $100 dollar bills for $99 dollars. That’s why they don’t show a profit. If the street and buy side actually understood accounting this charade would have ended a long time ago. There was a time when Amazon made a profit but it was less competitive in the early days and they were not in a myriad of ultra competitive non core businesses. The financial disclosure at AMZN is obtuse on purpose. It is meant to fool everyone into believing the Emperor has clothes on.
The big question in my mind is what do the page one holders of AMZN do tomorrow? I suspect some are realizing that all is not well in Seattle. I think several years from now this will be a Harvard Business School accounting case study. They will be teaching this: How did so many smart people miss this cash flow issue and why did investors put such a multiple on this business? In a QE world where growth is scarce many were blinded to the revenue growth and bought the meme that they were investing for the future.
If this stock breaks down and closes below $280 I see clear sailing to the low $200’s over time.
If you enjoy the content at iBankCoin, please follow us on Twitter
Thanks for the analysis. If this market begins to roll i wonder if the selling on this intensifies. I followed you into the short idea on this. Many thanks.
Nice call on this one. Very interested to see where it goes from here. Thanks.
Blue now this is basically trading at one x sales could this not be prime pickings for activist/value investors?
are you going to roll out your put to next month?
the amazon dip is being bought hard. up $13 off the low already.
Should have waited to cover my P short I was right. Everyone is bailing
If I were AMZN, I’d buy SHLD’s real estate and convert those into warehouses or smaller retail outlets in order to cut down on their shipping and logistics expenses. With SHLD all but done, AMCN could buy that real estate for 20 cents to the dollar, and refinance to take advantage of these historically low interest rates.
Note AMCN= AMZN sorry.
matt bear,
there appears to be some pinning action. I am sitting on my hands. I think we lose he %290 level.
money bags,
I don’t think we are near value investors range.
@Danny nice call.
It looks like MMs tried to pin options at the $290 level. Someone big is starting to lean on this stock.
blue, would you roll out on this play next week or just take this leg down and close it out?.
dragun,
i closed on Friday and rolled into IWM put. I will revisit. AMZN cash short soon.
I kept my put open and am going to give AMZN a few days to roll over, although that day is not today.
k_melancon,
I almost did that as well.
BlueStar,
I highly suspect the fed will announce the end of QE on Wednesday. Their hands are tied and must do so. I think being net short is probably the play going into the announcement and wait to see if the dip gets bought.
Well, my plan for AMZN to roll over seems to be a fail…..at this point, worth holding til expiration to see if it does.
There are rumors they leave $5 billion behind. having said that the set up for the Fed here is awful. I think it is very bearish we rally this hard before they speak. it would have been better for them if we were down today and then rallied after they speak.
What would the point in $5bn be? I can’t imagine it, even from these guys. I suspect the focus post release will be on language and dissenters. The bind for the fed is that while global macro economic and political issues plus a clearly flagging Europe speak to trouble ahead, the Fed essentially bases decisions on backward looking data. At present, “here and now” soft spots have not yet shown in the US Data giving them a reason to get more dovish, without them losing all credibility (or what remains of their credibility).
BlueStar – Haven’t heard much on blog about your assessment on this V shape rally. With NQ/ES near its new high, I’m anxious and eager to hear your take. It sounds like you got into IWM put again. Obviously TF has a way to go to its new high. Do you use NQ/ES’s new high as a sign or stick w TF’s new high to prove the trade’s wrong? Thank you.
L.B.,
I have 15% in IWM put as of today. I have been adding all the way up and I started at $110. I am playing with the houses money on Puts. On cash shorts I will short individual names in the back once we start to roll. I will be posting more soon. I have been watching and waiting.
BlueStar: Contrarian Investor – when u say u have 15% in IWM puts; if your account was 100k, 15k would be in those puts? Also, how far OTM & what month? Thanks.
Juice,
yes. the rest is cash. 12/20 105. I am bearish as you can tell. Listen I could be dead ass wrong. But if I am right pay off is big. I am playing for big move. This is not advice but This is what i am doing.
wow, I guess in this case at least, your philosophy is – go big or go home
Yup. I took profits from the first leg down and where I covered on 10/15 as you can see from my bounce article and rolled into this trade.
Clearly, BOJ action may prove me wrong here but I need to see how we trade today. What is strange is that Oil is actually trading down overnight. The dollar is going back to all time highs. I am very skeptical this changes anything but we shall see.
well, logic, experience & gut says this will end badly a la 1987, March 2000, 2008, the timing, however, is key as the powers that be are like cornered dogs and now there is a global cabal of them acting in concert
Juice,
timing is everything. so far I am in the hole on this one.
Looks like Orwell was 30 years off…learn to love the Big Bankers
BlueStar: Contrarian Investor –
put on your conspiracy hat for a sec : you think QE actually has not really ended despite what has been said and that the Fed is still running the printing presses ?
juice,
that would be hard to hide.
+1!