OT - Dow plunges 1,175 - worst point decline in history

[54ny77]

one of the businesses that really matter, aws, is up mid 40%+. that is nuts.

notable is that unit alone makes up more than half the company's profit.

margins are bonkers.

wonder if that would get spun off someday.

Originally Posted by pbarry

Yes, you're right, there are a few areas that dinged them. The jauggernaut slowed a hair.

It does seem that earnings reports in the last two months, if they are not absolutely stellar, result in over reactions from investors, especially in retail. True, or business as usual?

[verticaldoug]

Originally Posted by 54ny77

one of the businesses that really matter, aws, is up mid 40%+. that is nuts.

notable is that unit alone makes up more than half the company's profit.

margins are bonkers.

wonder if that would get spun off someday.

You may want to take a closer look at balance sheet, earnings announcement and do some comps.

gross margins on the business is 31% for AWS. Walmarts gross margin is 25% on retail. Walmarts eCommerce business grew faster than Amazon (yes, weaker comps) but MSFT Azure cloud also grew significantly faster than AWS.

And AWS is not half the profit. You are confusing gross profit numbers with net income numbers. Amazon doesn't allocate capex by segment, so what the net income for AWS is anyone's guess.

After raising prime fees , I am surprised they did not have a higher quarter. Employee costs are starting to increase, and the capex required to keep AWS and core retail competitive may be higher than expected. At some point a high PE company like Amazon will become a retailer PE like Walmart. Even Walmart is priced at 20x today when historic is more around 15x. With rising interest rates, forward PE should be lower.

If Amzn had the Wmt p/e, price is 172. So changes in revenue and expenses can really drive the expectations.

Anyway, this is just all speculation and the price will go whereever the price will go.


D

[54ny77]

that's great color.

can't understand why amzn entering physical space (retail). that is a nightmare (speaking from experience). now you're talking leases, physical upkeep, multitude of logistics & expenses, lawsuit liability (slip & fall, etc.), yadda yadda.

that to me says, "we've exhausted the online thing" and it starts to cannibalize online.

physical infrastructure is walmart's bread & butter, so their push into online would seem to be higher margin and on the surface sounds more appealing. deploying that efficiently and effectively in massive scale....it'll be interesting to see unfold.

Originally Posted by verticaldoug

You may want to take a closer look at balance sheet, earnings announcement and do some comps.

gross margins on the business is 31% for AWS. Walmarts gross margin is 25% on retail. Walmarts eCommerce business grew faster than Amazon (yes, weaker comps) but MSFT Azure cloud also grew significantly faster than AWS.

And AWS is not half the profit. You are confusing gross profit numbers with net income numbers. Amazon doesn't allocate capex by segment, so what the net income for AWS is anyone's guess.

After raising prime fees , I am surprised they did not have a higher quarter. Employee costs are starting to increase, and the capex required to keep AWS and core retail competitive may be higher than expected. At some point a high PE company like Amazon will become a retailer PE like Walmart. Even Walmart is priced at 20x today when historic is more around 15x. With rising interest rates, forward PE should be lower.

If Amzn had the Wmt p/e, price is 172. So changes in revenue and expenses can really drive the expectations.

Anyway, this is just all speculation and the price will go whereever the price will go.


D

[unterhausen]

Is amazon opening stores or just mailbox spaces? That's what they have here. Not sure it's in the right place, high rent street, not that close to student housing. But the mail locker idea is a good one. I feel like their strength as a retailer is they have everything and get it to you fast enough. A storefront can't match the variety. Walmart has the problem that when Sam died, they started selling junk. Really hard to erase 20 years of bad impressions. Target probably has a better chance.

[paredown]

Originally Posted by unterhausen

Is amazon opening stores or just mailbox spaces? That's what they have here. Not sure it's in the right place, high rent street, not that close to student housing. But the mail locker idea is a good one. I feel like their strength as a retailer is they have everything and get it to you fast enough. A storefront can't match the variety. Walmart has the problem that when Sam died, they started selling junk. Really hard to erase 20 years of bad impressions. Target probably has a better chance.

We were the Amazon store when it first opened at Garden State Plaza in NJ a year ago July--it was small, heavy on the electronics and order points for online. Nicely curated section of books, some of their own label computer accessories. Not really worth the drive, but I suspect some of what they are trying to is allow people to play with their tablets to drive sales...

Then there is the Whole Paycheck tie-in, both retail and Amazon lockers for pickup.
https://www.businessinsider.com/amaz...g-clear-2018-6

Haven't seen the Amazon Go convenience store concept--anyone been in one?

[Tony T]

Market in (or close to) correction
Over a 900 point DOW swing today

[likebikes]

another rough day on the street.

[kppolich]

Can't have a Santa Claus Rally without a fall sell-off during earning season.

[MikeD]

When there's a sell-off like this, where does the money go (e.g. cash, bonds... mattress (thinking old potato))?

[kppolich]

Originally Posted by MikeD

When there's a sell-off like this, where does the money go (e.g. cash, bonds)?

it vanishes
https://www.investopedia.com/article.../03/060603.asp

[MattTuck]

Originally Posted by kppolich

it vanishes
https://www.investopedia.com/article.../03/060603.asp

This is, in my opinion, the strongest argument against the wide spread use of stock buy backs as a mechanism to "return money to share holders."

[verticaldoug]

Originally Posted by MattTuck

This is, in my opinion, the strongest argument against the wide spread use of stock buy backs as a mechanism to "return money to share holders."

Not sure if I agree with that, but it does mean too much leverage in the stock market is usually so destructive.

[MattTuck]

Originally Posted by verticaldoug

Not sure if I agree with that, but it does mean too much leverage in the stock market is usually so destructive.

Was typing that on my phone last night, so maybe it needs more explanation.

The mechanics of a buy back generally involves the company having cash or borrowing money to raise cash, and then buying back shares in their own company on the open market.

The idea is generally couched in terms of 'returning money to shareholders'. (explaining for the wider audience)

However, the problem with that plan is that the people who actually receive the money are those shareholders that value cash more than holding shares in the company. In other words, the company had a chunk of money, it gave it to people who no longer hold your shares, and the people who still hold shares in the company are now on the hook (as a subordinate claim on cash flows) for paying back the loan.

As it pertains to my comment above, the 'increase in share price' that this operation is supposed to achieve is 100% illusory. If market expectations change to the negative, the price will drop, potentially wiping out any benefits to existing share holders. If you, as a shareholder, want to realize the benefit of a buy back, you need to [by its nature] sell your shares in that company. It is such a convoluted path for the money to travel that it defies common sense.

If a company truly wants to raise debt to reward its loyal shareholders, I think there is a strong argument that says a one time dividend (preferably paid to shareholders who have held shares for some period of time, let's say 365 days) is a superior mechanism for transferring value.

Buy backs benefit management much more than the average share holder through lowering of the number of shares, and gaming per share metrics like earnings.

[Tony T]

Interesting 3 day 1,000+ point bounce off of the "correction" that lasted all of 20 seconds.

[unterhausen]

Originally Posted by MattTuck

the company had a chunk of money, it gave it to people who no longer hold your shares, and the people who still hold shares in the company are now on the hook (as a subordinate claim on cash flows) for paying back the loan.

companies really take out loans to buy back stock? Which ones? Sounds like something I would sell. I know they have mostly gotten rid of dividends, and a lot of that money goes into executive compensation instead. I suspect that stock buybacks are usually an indirect form of executive compensation too.