Amazon.com Announces Second Quarter Sales Up 20%(ir.aboutamazon.com)
ir.aboutamazon.com
Amazon.com Announces Second Quarter Sales Up 20%
https://ir.aboutamazon.com/news-releases/news-release-details/amazoncom-announces-second-quarter-sales-20-634-billion
142 comments
What's interesting isn't the fact that they "make" more from AWS, it's that AWS gets premium margins where their store is running right at cost (and has been, basically forever -- it's their thing, sorta).
The interesting number you left out was the non-AWS revenue, which in 2018 (too lazy to correlate with today's announcement) was $230B, literally 30x higher. AWS is a tiny drop in the bucket, no matter what the profit details say.
Which then prompts the question of why AWS gets that kind of margin, when it would seem like a pretty commoditized field at this point. Linux VMs are an open and very portable deployment platform. You can get them from any number of top tier providers and a huge horde of little ones. You'd expect to see a ton of competition driving prices down, but we don't. I genuinely don't know why.
The interesting number you left out was the non-AWS revenue, which in 2018 (too lazy to correlate with today's announcement) was $230B, literally 30x higher. AWS is a tiny drop in the bucket, no matter what the profit details say.
Which then prompts the question of why AWS gets that kind of margin, when it would seem like a pretty commoditized field at this point. Linux VMs are an open and very portable deployment platform. You can get them from any number of top tier providers and a huge horde of little ones. You'd expect to see a ton of competition driving prices down, but we don't. I genuinely don't know why.
AWS is basically "run your entire company's engineering as a service" now, and they've done a good job at it. It's not at all easy to compete with such an integrated and battle-tested platform (other than on cost; AWS can be pretty expensive).
This is absolutely true, sure, but the UX is dreadful. If someone like, say, DigitalOcean who has nice design spent the money to actually compete, I'd move in a heartbeat. Google is a nonstarter, and Azure is a 'maybe'. Most people use a few key services. Everytime I log in, I'm slammed with 200 tiny hyperlinks.
Where I work we spend millions per month on AWS, its our primary cloud platform.
At that scale the UI of the console really doesn't matter, everything is IAC so developers rarely need to directly access AWS. The one thing we do use is the Cost and Usage explorer which has a reasonable UI
At that scale the UI of the console really doesn't matter, everything is IAC so developers rarely need to directly access AWS. The one thing we do use is the Cost and Usage explorer which has a reasonable UI
> UI of the console really doesn't matter, everything is IAC so developers rarely need to directly access AWS
Okay, but those "rare" times when you do need to access the infrastructure, having good UI is pretty helpful.
Okay, but those "rare" times when you do need to access the infrastructure, having good UI is pretty helpful.
Just curious, why is Google a nonstarter?
Most companies don't even consider Google, it's a distant third and provides very limited offerings. There is a lot of love for Google on HN, but reality does look different.
Ther is also a common believe that they will just drop support for something whenever they feel like it - which in regards to GCP could be unwarranted but well it is what it is. I would pick AWS first, Azure is becoming a close second and GCPa distant third. I think Digital Ocean looks awesome and might be worth a look before GCP.
Also, GCP is having stability issues recently.
Ther is also a common believe that they will just drop support for something whenever they feel like it - which in regards to GCP could be unwarranted but well it is what it is. I would pick AWS first, Azure is becoming a close second and GCPa distant third. I think Digital Ocean looks awesome and might be worth a look before GCP.
Also, GCP is having stability issues recently.
Fear of abandonment perhaps.
We are looking to move some of our applications to the cloud and Kubernetes the coming time. We'd like to go for DO, partially for the horror the AWS interface appears to be. Could you give me an idea what we'd be missing by choosing DO over AWS? (as your comment appears to say we would)
Just of the top of my head you miss the following - whether they matter to you is a question only you can answer:
* Access control for everything via IAM. This for me is the killer feature for AWS, almost anything from users, to servers, to individual IoT devices can be granted permission to access other AWS resources with extreme granularity.
* Audit logging of every single API call, user invoked or otherwise, via Cloudtrail.
* Monitoring of and responding to key metrics via Cloudwatch. This isn’t just graphs as it can appear on the surface, Cloudwatch alarms allow you to do things like killing individual servers if they start throwing errors while others aren’t.
* Responding to changes in your infrastructure via Cloudtrail. We’re using this for features ranging from emailing our security team when a new IAM user is provisioned, through to full release orchestration.
* All those features supported across services that can fulfil more or less any requirement you have, whether that’s a MySQL database, a message queue, or (should you really need it) a satellite downlink.
DO are fine if what you want really is just a server in a data centre somewhere, but you’re missing out on a lot of really powerful management features with them, without even getting into the other services AWS have.
* Access control for everything via IAM. This for me is the killer feature for AWS, almost anything from users, to servers, to individual IoT devices can be granted permission to access other AWS resources with extreme granularity.
* Audit logging of every single API call, user invoked or otherwise, via Cloudtrail.
* Monitoring of and responding to key metrics via Cloudwatch. This isn’t just graphs as it can appear on the surface, Cloudwatch alarms allow you to do things like killing individual servers if they start throwing errors while others aren’t.
* Responding to changes in your infrastructure via Cloudtrail. We’re using this for features ranging from emailing our security team when a new IAM user is provisioned, through to full release orchestration.
* All those features supported across services that can fulfil more or less any requirement you have, whether that’s a MySQL database, a message queue, or (should you really need it) a satellite downlink.
DO are fine if what you want really is just a server in a data centre somewhere, but you’re missing out on a lot of really powerful management features with them, without even getting into the other services AWS have.
DO provides VMs and Kubernetes as a service. AWS provides Freaking everything as a service. You might need Redis. You might need Postgres. You might need Hadoop, NFS, A Monitoring Solution, Access Controls for your account, Docker Repo Hosting... AWS does all of these things as managed services (though some not very well).
You definitely don't want to run your RDBMS on Kubernetes, and while DO's "Marketplace" has a solution, it's not the same.
You definitely don't want to run your RDBMS on Kubernetes, and while DO's "Marketplace" has a solution, it's not the same.
DO has managed hosted Postgres now, with Redis and MySQL coming. I’ve been using it for a few months and it’s been fantastic. The interface to get it running is unbelievably simple. DO is killing it lately.
> You definitely don't want to run your RDBMS on Kubernetes
If you’re targeting AWS you’re probably better off using their solution, but you can totally run your database on k8s. And for some uses it’s even a good idea.
If you’re targeting AWS you’re probably better off using their solution, but you can totally run your database on k8s. And for some uses it’s even a good idea.
If you're new to Kubernetes, you shouldn't attempt to run a RDBMS, especially if it's not a dev/staging DB and/or needs to run in a HA config. Operators aren't mature and if you're rolling your own statefulset you better know what you're doing (with kubernetes and with the DB you're running).
> If you're new to Kubernetes, you shouldn't attempt to run a RDBMS ... if you're rolling your own statefulset you better know what you're doing
I've been doing this for a while. Before there were statefulsets, it was pretty painful. But now, it's relatively easy. Sure, not as easy as a PaaS database that seems to just work, but much easier than managing a cluster of servers with all sorts of crazy scripts.
I've been doing this for a while. Before there were statefulsets, it was pretty painful. But now, it's relatively easy. Sure, not as easy as a PaaS database that seems to just work, but much easier than managing a cluster of servers with all sorts of crazy scripts.
> We are looking to move some of our applications to the cloud and Kubernetes the coming time.
Google Cloud has a ton of built-in support and UI for Kubernetes clusters. They make it really nice. It's roughly the same price, so I'm not sure I'd run Kubernetes on any other service.
Google Cloud has a ton of built-in support and UI for Kubernetes clusters. They make it really nice. It's roughly the same price, so I'm not sure I'd run Kubernetes on any other service.
Have you compared it with DO's Kubernetes UI and support? Is DO really worse in that area?
> Have you compared [Google Cloud] with DO's Kubernetes UI and support? Is DO really worse in that area?
Nope, wish I had time to devote to such a comparison. Would love to see an article.
Nope, wish I had time to devote to such a comparison. Would love to see an article.
All of the Digitalocean SF data centers were down for at least 10-20 minutes earlier this week during my company’s peak hours.
They seem to be having growing pains.
I wouldn’t move any critical stuff just yet. I’m optimistic for the future though.
Why is Google a nonstarter?
These parent kind of comments are like saying: “apples are cheaper then oranges. I dont like red cars.”
There is nothing to be discussed here. If you compare do with azure, google and aws and are talking about the interface being most important: you clearly are not the enterprisish client aws/azure/google is aiming for.
There is nothing to be discussed here. If you compare do with azure, google and aws and are talking about the interface being most important: you clearly are not the enterprisish client aws/azure/google is aiming for.
I’d go further and say that in almost every domain, there is a startup to be built that can be described as “like X, but with a good UI”.
Never underestimate the power of good aesthetics and design.
Never underestimate the power of good aesthetics and design.
> Google is a nonstarter
That might be unique to you, I've been using google and I've very much enjoyed the experience, why doesn't it work for you?
That might be unique to you, I've been using google and I've very much enjoyed the experience, why doesn't it work for you?
Same thing as a fast food burger versus a restaurant porter house, you get what you pay for.
Analogy is a little off.
AWS is fast food and expensive because consistency, availability, and volume are what count in the cloud business. You can get better quality VMs for less money but you won’t be able to provision thousands easily and it’s not going to be available 24/7.
AWS is fast food and expensive because consistency, availability, and volume are what count in the cloud business. You can get better quality VMs for less money but you won’t be able to provision thousands easily and it’s not going to be available 24/7.
Even further, I'd say AWS is fast food that supports dozens of niche diets - pretty much anywhere in the world, anytime.
McDonald's isn't impressive because they can make a Big Mac in 30 seconds. They're impressive because I can get almost the exact same Big Mac anywhere in the world.
McDonald's isn't impressive because they can make a Big Mac in 30 seconds. They're impressive because I can get almost the exact same Big Mac anywhere in the world.
I don’t think it’s commoditized. AWS has moved past being just EC2. Virtualization is a small piece or the picture, and building and operating DynamoDB or S3 or SQS are all very tough tasks.
It's not commoditized at the scale Amazon operates it at.
And from an AWS / profit perspective, running the rest of Amazon is essentially what gives them a base consumer to get them to that scale.
And from an AWS / profit perspective, running the rest of Amazon is essentially what gives them a base consumer to get them to that scale.
Which is the strange part. Because it is rather commoditized on the level that 95% of their customers are by themselves.
It's that aggregate of so many individual clients that makes it difficult. So why aren't all the small clients getting picked off by the hundreds of small competitors?
My take is that the sheer scale of AWS has hit a point where engineers (the ones making infrastructure decisions) and moving from one company to another are just more likely to be familiar with AWS at this point. The same concept makes hiring easier.
My other guess is that lots of engineers are like me and just got sick of their hosting company getting bought out and constantly having to deal with console changes and migrations.
I am with GCP now, one of the reasons I picked GCP is because they are very large and have reasons to continue offering cloud services even if it becomes commoditized and unprofitable. The same is true for AWS.
Also, of course "no one ever got fired for choosing AWS".
It's that aggregate of so many individual clients that makes it difficult. So why aren't all the small clients getting picked off by the hundreds of small competitors?
My take is that the sheer scale of AWS has hit a point where engineers (the ones making infrastructure decisions) and moving from one company to another are just more likely to be familiar with AWS at this point. The same concept makes hiring easier.
My other guess is that lots of engineers are like me and just got sick of their hosting company getting bought out and constantly having to deal with console changes and migrations.
I am with GCP now, one of the reasons I picked GCP is because they are very large and have reasons to continue offering cloud services even if it becomes commoditized and unprofitable. The same is true for AWS.
Also, of course "no one ever got fired for choosing AWS".
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You’re comparing quarterly revenue from AWS to annual Amazon? The proper ratio is more like 7-8x, not 30x.
It's not commodotized at all. They have successfully achieved the jump to be the "nobody got fired for choosing company X" of cloud computing. Everybody trusts them. I've been directly involved in planning out cloud migration for an organization and put forward other options that were substantially cheaper but it didn't matter: they wanted AWS.
Simple.
Server multiplexing.
Let's say I increase fleet utilization for 1%. My projected margin increase 1%, not retrospectively though. Plus the projected server hardware price drop. The margin increases naturally. If there were no competitor from Google and MSFT. Amzn would need to be extremely aggressive to not making a log of money.
That's why Google was very confident in winning the Cloud war back in early 2012-2014, and prior to that time frame. Google can operate fleet utilization way higher than industry standard, and clearly is ahead of Amzn then.
But it turns out a business is not that simple as writing code. And obviously, Amzn catches up in fleet efficiency. AFAIK, now Google and Amzn are almost head on head in that department, while Azure is the poor kid lagging behind. But that's not a problem for MSFT. Their strength is in enterprise and conventional developer community building.
Server multiplexing.
Let's say I increase fleet utilization for 1%. My projected margin increase 1%, not retrospectively though. Plus the projected server hardware price drop. The margin increases naturally. If there were no competitor from Google and MSFT. Amzn would need to be extremely aggressive to not making a log of money.
That's why Google was very confident in winning the Cloud war back in early 2012-2014, and prior to that time frame. Google can operate fleet utilization way higher than industry standard, and clearly is ahead of Amzn then.
But it turns out a business is not that simple as writing code. And obviously, Amzn catches up in fleet efficiency. AFAIK, now Google and Amzn are almost head on head in that department, while Azure is the poor kid lagging behind. But that's not a problem for MSFT. Their strength is in enterprise and conventional developer community building.
That's the case since at least 2016. Back then, when Amazon shares were around 1k USD I had the theory that at least 800 USD came from AWS and the rest came from Amazon's retail business. Made sense back than because before AWS took of shares stood around 200 USD if I remember correctly.
Not sure what that says about Amazon in 2019, so.
Not sure what that says about Amazon in 2019, so.
Proof I have no idea how the stock market works:
“Wow, that’s insane, their stock must have popped back over 2k because of this news!”
checks ticker
“Down 2.5% after hours...?”
“Wow, that’s insane, their stock must have popped back over 2k because of this news!”
checks ticker
“Down 2.5% after hours...?”
As always, it's due to the results being below Wall St estimates that are already priced into the stock which is still trading at an insanely expensive 100 P/E ratio.
This is an important point. The stock market doesn't try to reward companies with higher share prices, it tries to find the correct price and stabilize there.
If your company is expected to do well, that performance is already built into your stock price. Doing exactly as well as expected, even if you've doubled your profits, won't cause your share prices to change at all. Because everyone already expected you to do that, so they were willing to pay more money to own your stock even before the official news.
The only thing that changes the stock market drastically is a surprise.
If your company is expected to do well, that performance is already built into your stock price. Doing exactly as well as expected, even if you've doubled your profits, won't cause your share prices to change at all. Because everyone already expected you to do that, so they were willing to pay more money to own your stock even before the official news.
The only thing that changes the stock market drastically is a surprise.
What about uncertainty? Surely the removal of uncertainty would cause a movement in the price even when a company performs exactly as predicted?
No. Imagine a coin flip where you earn $1.1 on head and lose $1 on tail. What is the value of such a flip? $0.05
Now I offer you a coin flip with less uncertainty. It earns you $0.6 on head and loses you $0.5 on tail. Would you pay more then $0.05 for it? No. Uncertainty was reduced, but no value was created.
Now I offer you a coin flip with less uncertainty. It earns you $0.6 on head and loses you $0.5 on tail. Would you pay more then $0.05 for it? No. Uncertainty was reduced, but no value was created.
This assumes that people operate only on expected value and don't care about variance at all, which is incorrect empirically, theoretically, and intuitively. The premium you pay for reducing variance is called a "risk premium", and it follows pretty trivially from the diminishing marginal utility of money (though there are many other ways to derive/explain it). This is the entire reason that insurance exists as a product: it's not designed solely to cover existential risks or to prey on the irrational.
Well, if you pay me more then $0.05 for the $0.6/-$0.5 coin flip, I will happily sell you some. How much do you want?
I think GP disagreed with your assumption that a $1.1/-$1 coin flip was worth $0.05, so they'd pay more for the $0.6/-$0.5 coin flip than for the $1.1/-$1 flip, but still less than $0.05.
If that is true, then I will happily buy $1.1/-$1 flips for $0.049 from them!
They would pay a premium to avoid uncertainty, so they wouldn't accept that offer either. The uncertainty is the same whether you sell or buy the flips. I don't know you, but I guess you wouldn't pay $499K for a $1M/$0 flip, and you wouldn't sell such a flip for $499K either. This is the same phenomenon on a much smaller scale.
I guess you wouldn't pay $499K for a $1M/$0 flip
We are discussing if the share price of a company that publishes numbers in line with expectations should go up.
What do you mean by “expectations”? If Amazon trades a $2000, is the expectation that it will stay at $2000 forever? Or is the expectation that will go up because it will surpass expectations?
If by expectations we mean the numbers published by sell-side analysts they may or may not be close to the actual market expectations.
If by expectations we mean the numbers published by sell-side analysts they may or may not be close to the actual market expectations.
Say you can pay $10k and get (50/50) either $0 or $22k. The expected gain is $1k.
A second game also costs $10k to enter, but the (50/50) payouts are $9k and $13k.
Do you find then equally attractive? Most people wouldn’t.
If you do, what if you could instead “play” a game where you pay $10,000 and get $10,999 straight away? It’s a worse proposition if you’re risk-neutral, isn’t it?
A second game also costs $10k to enter, but the (50/50) payouts are $9k and $13k.
Do you find then equally attractive? Most people wouldn’t.
If you do, what if you could instead “play” a game where you pay $10,000 and get $10,999 straight away? It’s a worse proposition if you’re risk-neutral, isn’t it?
And while it’s true that if markets were efficient you wouldn’t be compensated for diversifiable risk it’s also true that a) markets are not efficient and b) uncertainty in the results of companies is correlated with the market and not completely diversifiable.
Some funds are sufficiently large/diversified to avoid worrying about uncertainty in a single stock. If someone cared about this uncertainty, they would already have sold their shares to these funds before, so the reduction of uncertainty would have a negligible impact on share price.
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Price/Sales is 4.01, lower than GOOG, FB or MSFT. They are going for growth, not profit. No valuation metric is perfect, but P/E is particularly useless for this company.
A huge part of Amazon's business is retail where it never is going to have the same margins as any of the tech companies you listed. It's not really useful to compare Price/Sales in those contexts.
Comparing their price to sales ratio with that of companies in different businesses doesn’t make much sense either.
P/E is NEVER useless. For instance, if a company misses on earnings, then maybe it was an outlier - an odd quarter of sorts. But if you do it a few times over, then you are not the growth company you thought you were, and your 100:1 p/e will come crashing down to join everybody else (albeit maybe on the high side) somewhere in the upper 20’s or in the 30’s.
But here’s the key - to do that, a stock would have to lose TWO THIRDS of it’s value.
So a really high p/e signals really high growth expectations, and when a company isn’t growing at that expectation, the law of gravity again takes control and it will fall back to earth.
Ignore it at your own peril.
But here’s the key - to do that, a stock would have to lose TWO THIRDS of it’s value.
So a really high p/e signals really high growth expectations, and when a company isn’t growing at that expectation, the law of gravity again takes control and it will fall back to earth.
Ignore it at your own peril.
But you are assuming that the end goal of the company and purpose of buying the stock is to participate in "earnings" in the form of dividends.
But that is no longer the MO of many public companies now.
The goal appears to just eternally grow the stock price and allow share holders to cash out in the form of appreciated shares which get a preferable capital gains tax treatment.
Occasional earnings are just there to prove to the market that you could make money if you wanted to. Amazon has never paid dividends and probably never will unless their shareholders are able to convince them otherwise.
To take it even further, there are additional tax advantages to capital appreciation for the wealthy that hold Amazon stock. They can even choose not to sell appreciated stock but instead get low interest loans using their stock as collateral.
Buy stock - let it appreciate - increase your line of credit - live off the borrowed money that has a lower interest rate than the stock price growth rate - continue until death - let estate sell the stock and take a one time tax hit.
But that is no longer the MO of many public companies now.
The goal appears to just eternally grow the stock price and allow share holders to cash out in the form of appreciated shares which get a preferable capital gains tax treatment.
Occasional earnings are just there to prove to the market that you could make money if you wanted to. Amazon has never paid dividends and probably never will unless their shareholders are able to convince them otherwise.
To take it even further, there are additional tax advantages to capital appreciation for the wealthy that hold Amazon stock. They can even choose not to sell appreciated stock but instead get low interest loans using their stock as collateral.
Buy stock - let it appreciate - increase your line of credit - live off the borrowed money that has a lower interest rate than the stock price growth rate - continue until death - let estate sell the stock and take a one time tax hit.
You are the one conflating dividends and earnings. Even if a company chooses to reinvest retained earnings instead of returning cash to investors [1] it’s good to be profitable. Not just “to prove that you could”, but to avoid being just a money-burning machine (not Amazon’s case, mind you; they do not have “occasional earnings”, they’ve been consistenly profitable for the last 15 years).
[1] Either through dividends or through buybacks. The second option has some advantages relative to dividends and results in capital gains for the investors that choose to sell.
[1] Either through dividends or through buybacks. The second option has some advantages relative to dividends and results in capital gains for the investors that choose to sell.
First, capital gains and dividends have basically the same tax treatment (not identical, but close enough for anyone holding for longer than a year).
Second, a company’s market capitalization can only grow in one of two ways: increase in the P/E ratio, or increase in earnings. Of the two, the latter is more sustainable, and less susceptible to market downturns.
Dividends are just the percentage of earnings a company pays out to its shareholders for various reasons (I’ll skip the myriad of reasons for brevity).
The best measure of sustainable value creation is ROIC (Return On Invested Capital). Most people don’t use it because it’s not a readily available statistic and it’s not easy to calculate. But for the long term, I don’t know of anything better. Still, p/e is important.
Second, a company’s market capitalization can only grow in one of two ways: increase in the P/E ratio, or increase in earnings. Of the two, the latter is more sustainable, and less susceptible to market downturns.
Dividends are just the percentage of earnings a company pays out to its shareholders for various reasons (I’ll skip the myriad of reasons for brevity).
The best measure of sustainable value creation is ROIC (Return On Invested Capital). Most people don’t use it because it’s not a readily available statistic and it’s not easy to calculate. But for the long term, I don’t know of anything better. Still, p/e is important.
>First, capital gains and dividends have basically the same tax treatment (not identical, but close enough for anyone holding for longer than a year).
No, that's not correct. If you are being paid a dividend, whether it be qualified or not, that money is double taxed. Once at the corporate earnings rate and then again to you personally at capital gains rate.
As a shareholder, whether that tax all comes out of your pocket or not, doesn't matter. Your increase in value is effectively taxed at 60-70%.
But that is not the case if the company you invest in, rather than retaining earnings to pay dividends, reinvests into growth or other capital expenditures or keeps large sums of untaxed money in overseas accounts. Thus continually pushing the stock upwards. And allowing investors to make their own choices about cashing out. Be it by selling shares of getting loans using the stock as collateral.
Why in the world do you think Apple has $250B in cash, a full quarter of their total market cap, mostly stashed away in tax free zones?
It is for the simple reason that people can invest and get that money reinvested for them all without ever having to sell or take a distribution and then get taxed before using it or reinvesting it yourself.
No, that's not correct. If you are being paid a dividend, whether it be qualified or not, that money is double taxed. Once at the corporate earnings rate and then again to you personally at capital gains rate.
As a shareholder, whether that tax all comes out of your pocket or not, doesn't matter. Your increase in value is effectively taxed at 60-70%.
But that is not the case if the company you invest in, rather than retaining earnings to pay dividends, reinvests into growth or other capital expenditures or keeps large sums of untaxed money in overseas accounts. Thus continually pushing the stock upwards. And allowing investors to make their own choices about cashing out. Be it by selling shares of getting loans using the stock as collateral.
Why in the world do you think Apple has $250B in cash, a full quarter of their total market cap, mostly stashed away in tax free zones?
It is for the simple reason that people can invest and get that money reinvested for them all without ever having to sell or take a distribution and then get taxed before using it or reinvesting it yourself.
Go back and read what I said. Better yet, read Schwab’s tax summary here: https://www.schwab.com/public/schwab/investing/retirement_an...
My statement is correct.
My statement is correct.
I think you need to re-read what I wrote. You are correct that your personal rate is similar for dividends vs capital gains.
But you are iggiring the bigger picture that dividends money had to be taxed on the corporate side before it was given to you.
Capital gains that are propped up by huge cash stores in overseas tax free accounts are not.
But you are iggiring the bigger picture that dividends money had to be taxed on the corporate side before it was given to you.
Capital gains that are propped up by huge cash stores in overseas tax free accounts are not.
P/S is also hard to use unless you did that for just AWS. Better to look at price to operating cash flow and better yet to capitalize R&D and leases.
PE is used as a comparison, if 10 of your peers are at 15 and you are at 30 you may be over priced or the expectations are sky high for you to grow beyond expectations
Amazon and e.g Google are not peers. The vast majority of Amazons business is retail, not tech.
That's up for debate. Of the revenues that are reported under Amazon retail, a significant portion (some estimates say way more than half) are fees collected from 3rd party sellers using both the online platform and physical warehousing services.
I would argue that portion of their retail revenue is much closer to tech than retail, considering the margins are comparable to tech companies.
I would argue that portion of their retail revenue is much closer to tech than retail, considering the margins are comparable to tech companies.
They're not a Startup, they've been "going for growth" for a 1/4 of a century, eventually you need to make a profit to justify your Market Cap. Just because profit isn't a goal for AMZN doesn't mean it's not a vital financial metric.
Revenue is up 20% year over year. The growth is real, not just a goal.
Only 20% is why the stock is down after hours, at 100 P/E AMZN is speculatively priced where they're expected to achieve infinite growth until they deliver financials that justify their valuation which Investors are betting on to happen before they hit any growth ceiling. There's also no room for an economy downturn which expensive stocks like AMZN are extremely volatile to.
Growing 20% at Amazon's size is why the stock is worth so much. Almost all companies have slowed down long before this point. Amazon is still growing like a late stage startup. It's really a remarkable feat.
Are Facebook, Google, Microsoft also still considered late stage Startups?
FB Growth 28% YoY, P/E 26.51, Mkt Cap 573B
GOOG Growth 19% YoY, P/E 25.90, Mkt Cap 788B
MSFT Growth 12%, P/E 27.69, Mkt Cap 1.07T
It's pretty meaningless to look at P/E for tech companies and compare it to a retail company.
But for those companies it's also pretty impressive, market beating growth.
But for those companies it's also pretty impressive, market beating growth.
> It's pretty meaningless to look at P/E for tech companies and compare it to a retail company.
Tech stocks usually have higher P/E's than retailers, but for comparison here are the P/E Ratios of the world's largest retailers:
Tech stocks usually have higher P/E's than retailers, but for comparison here are the P/E Ratios of the world's largest retailers:
WMT 38.8
COST 34.33
KG 9.24
WBA 10.75
HD 21.73
TGT 15.39Yes, but now look at their growth as well and you'll understand Amazon's valuation is not wholly out of line.
> Yes, but now look at their growth as well and you'll understand Amazon's valuation is not wholly out of line.
Then please lay out your understanding of what justifies AMZN's price in your eyes as you've yet to quote a single figure.
The only reason why WMT's P/E is so high (and their Market Cap doubled in since 2016) is because of their success in their e-commerce business which saw 37% growth YoY.
You've been saying AMZN is a retail business whose financials can't be compared to Tech stocks which is clearly untrue, AMZN's retail business is less than 1/2 the size of Walmart yet they're worth 3x more who would've been worth even more if they didn't give out dividends which AMZN can't dream of doing at their current valuation.
Then please lay out your understanding of what justifies AMZN's price in your eyes as you've yet to quote a single figure.
The only reason why WMT's P/E is so high (and their Market Cap doubled in since 2016) is because of their success in their e-commerce business which saw 37% growth YoY.
You've been saying AMZN is a retail business whose financials can't be compared to Tech stocks which is clearly untrue, AMZN's retail business is less than 1/2 the size of Walmart yet they're worth 3x more who would've been worth even more if they didn't give out dividends which AMZN can't dream of doing at their current valuation.
You've presented a concise and valid set of statements that argue that a 100 P/E ratio might be expensive, but don't justify calling it insanely expensive.
I don't understand why companies don't just let there stock price fall. This makes no material difference to the operating of the company, right?
Rising stock price is helpful for retaining high value employees that are compensated with stock
I guess. You could just pay them more though.
> I guess. You could just pay them more though.
This is a good idea. Stop the stock game and just pay a set base salary = to comp + stock.
But we can’t do that because that would take all the fun out of seeing part of your potential income fluctuate with the whims and buffoonery of Wall Street.
This is a good idea. Stop the stock game and just pay a set base salary = to comp + stock.
But we can’t do that because that would take all the fun out of seeing part of your potential income fluctuate with the whims and buffoonery of Wall Street.
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Shareholders own companies and a rising stock price benefits shareholders who elect the board members that run said company, a falling stock price isn't in anyone's interest who are invested in the company.
It does help with M&A, raising capital, employee stock options + bonuses.
It's rare, but sometimes you'll hear company Investors saying that their stock price is too high, like Zoom's CEO [1].
[1] https://www.bloomberg.com/news/articles/2019-04-18/zoom-vide...
It does help with M&A, raising capital, employee stock options + bonuses.
It's rare, but sometimes you'll hear company Investors saying that their stock price is too high, like Zoom's CEO [1].
[1] https://www.bloomberg.com/news/articles/2019-04-18/zoom-vide...
That ratio is unreliable because of how they invest so much in future growth. Those capital and R&D expenses will not be around forever.
That may turn out to be so in the long term, but it doesn't align with the current ethos of "It's always day one" at Amazon.
"Amazon.com Inc.'s record quarterly profit streak has ended, as the online retailer faced higher shipping costs, slowing growth from its cloud-computing business and a steeper loss in its overseas retail business.
The company’s second-quarter profit rose 3.6% from a year ago to $2.63 billion after more than doubling last quarter. It missed analysts’ consensus estimate. Amazon had posted its best-ever profit the previous four quarters."
https://www.wsj.com/articles/amazons-streak-of-record-profit...
The company’s second-quarter profit rose 3.6% from a year ago to $2.63 billion after more than doubling last quarter. It missed analysts’ consensus estimate. Amazon had posted its best-ever profit the previous four quarters."
https://www.wsj.com/articles/amazons-streak-of-record-profit...
The reason the stock market is hard to predict is because it itself is a prediction.
https://www.hl.co.uk/shares/share-research/201907/amazon-pro...
> For a company with sales of $233bn last year, Amazon makes surprisingly little profit. That's because the bulk of sales come from the retail business, which generates a comparatively modest profit margin. In fact outside the US, Amazon's retail business loses money.
> For a company with sales of $233bn last year, Amazon makes surprisingly little profit. That's because the bulk of sales come from the retail business, which generates a comparatively modest profit margin. In fact outside the US, Amazon's retail business loses money.
These days, every piece of information is already included in the quotations.
Here it means that the large increase is not new information, probably that it does not match predictions/expectations is.
Here it means that the large increase is not new information, probably that it does not match predictions/expectations is.
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AWS growth is priced in. So if the stock priced dropped, then it's likely that most analysts were expecting ~50% YoY revenue increases.
In addition to others points on this, public companies release a guidance, which in concert with analysts' own predictions of growth, is priced in.
One of the main metric other than rev is shrinking, could be profit margins, or 20% isn’t as large as most analysts predicted
Buy on the rumor, sell on the news
Revenue growth slowed due to the cost of one day shipping. It's not about revenue being up, but how much revenue is growing. If revenues go up some large amount, but it's up by less percentage wise than it was up last year that means growth is slowing.
Costs aren't factored into revenue.
What a life, sales are up 20% and there are frowns all around...
Obviously not literally what happened, but selling a dollar for 90 cents would help boost the sales figures but hurt the bottom line. Sales alone doesn't tell the whole story.
They actually missed wall street expectations on profit, this isn't a victorious quarter for then.
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Stock is down 3% after hours.
Does anyone feel lile commenting on why stock price fell after this?
Effectively zero net income or operating income growth ($2.6b vs $2.5b; and $3.1b vs $3.0b), despite 20% sales growth. The market generally dislikes it when margins contract.
Plus, AWS growth dropped to 37% from 49%, year over year. I consider that a great number given their size is approaching that of Oracle. However, every headline likes to hang on the persistent decline in AWS growth. It's a very large part of what's propping up the enormous AMZN valuation. As goes AWS, so goes the AMZN stock.
Plus, AWS growth dropped to 37% from 49%, year over year. I consider that a great number given their size is approaching that of Oracle. However, every headline likes to hang on the persistent decline in AWS growth. It's a very large part of what's propping up the enormous AMZN valuation. As goes AWS, so goes the AMZN stock.
Because earnings came in below forecast.
Why would you expect it to go up? The market was already pricing in the expected sales and clearly the number in the spreadsheets before the second quarter report was higher than the real actualized value that was released.
$14B in goodwill! Crazy.
Mostly ($9bn) from the $13bn acquisition of WholeFoods.
That doesn't sound super unreasonable to me. Imagine if Amazon suddenly was a different company with a different name, holding everything else the same. How would this affect cashflows and sales? The difference in sales between this hypothetical company and Amazon is essentially what goodwill is. $14B sounds okay when you think about it like this.
Goodwill is the accounting balance recorded when a company buys another company for more than the value of its assets.
If you have $1bn in assets, and you sell to my company for $2bn, $1bn is recorded as the assets bought and the other $1bn has to be recorded somewhere - and that somewhere is 'goodwill.'
Later, if the acquisition turns out to have been a bad idea, and what I bought from you was worth only $1.2bn, I will record an $800mm 'goodwill impairment' that would be a loss on my income statement and 80% of that goodwill would no longer be recorded as an asset.
If you have $1bn in assets, and you sell to my company for $2bn, $1bn is recorded as the assets bought and the other $1bn has to be recorded somewhere - and that somewhere is 'goodwill.'
Later, if the acquisition turns out to have been a bad idea, and what I bought from you was worth only $1.2bn, I will record an $800mm 'goodwill impairment' that would be a loss on my income statement and 80% of that goodwill would no longer be recorded as an asset.
And “assets” as accountants define them are an almost useless metric for knowledge-based companies.
No, that’s not what $14bn of goodwill in Amazon’s balance sheet are.
How would it be, to be able to self declare something like "prime day" and make more than black Friday sales?
To put this in some global perspective... Alibaba's one day sales event "Singles Day" last November grossed almost half that amount (i.e. $30B).
Note: Alibaba's operating margins are approx. 30%.
Note: Alibaba's operating margins are approx. 30%.
Yet Alibaba's revenue for all of 2018 was $55B USD, compared to $232B USD for Amazon.
I see that one day sale thing appear in many mentions of Amazon and it might be a little...misleading.
I see that one day sale thing appear in many mentions of Amazon and it might be a little...misleading.
Am I missing something or are Alibaba seriously making more than half their annual sales in one single day?
Alibaba’s revenue is (primarily) only the fees and commission they charge their sellers. They did $30B of gross sales on that day but probably only collected $1-3B in reportable revenue. Amazon does the same thing for it’s third-party sellers; only the fees and commission make it to Amazon’s top line revenue number for seller sales.
It looks like the one-day number is gross (ie, no costs subtracted), the other is net profit.
They allow you to order in advance for discounts, and book all the sales on one day as a PR exercise.
Yet Alibaba's operating margins are 15X (31% vs 2%) that of Amazon.
Revenue is nothing but bragging rights. Profit is what matters.
That's not true. Road to profitability and market cap are what matter.
Hypothetical: One business is making $100million in revenue, is losing $20million a year but has enough market cap to grow 10-100x and is spending most of its money on R&D/marketing, while a second business makes $1million in profit on $10million in revenue, but you've maxed out your growth and there's no more market cap, I'd rather be business 1, as you're on the road to potentially make hundreds of millions in profit later on.
i.e. I'd rather be Amazon some years back when they weren't profitable than some mom and pop online business that makes enough to pay the mortgage.
Hypothetical: One business is making $100million in revenue, is losing $20million a year but has enough market cap to grow 10-100x and is spending most of its money on R&D/marketing, while a second business makes $1million in profit on $10million in revenue, but you've maxed out your growth and there's no more market cap, I'd rather be business 1, as you're on the road to potentially make hundreds of millions in profit later on.
i.e. I'd rather be Amazon some years back when they weren't profitable than some mom and pop online business that makes enough to pay the mortgage.
Market cap is just the number of outstanding shares * price.. It says nothing about the quality of the business. Your explanation doesn’t make sense in that regard.
Even now, looking at the results, Amazon retail is not a great profitable business. It’s still low margin. No one could have predicted AWS - the true success story.
And look no further than YC backed companies. Have any of them become profitable? Even the one company that has gone public - Dropbox - isn’t looking to good these days.
Even now, looking at the results, Amazon retail is not a great profitable business. It’s still low margin. No one could have predicted AWS - the true success story.
And look no further than YC backed companies. Have any of them become profitable? Even the one company that has gone public - Dropbox - isn’t looking to good these days.
Yes I meant TAM as the other person commented.
Further more, even if amazon retail still isn't profitable (I haven't checked the numbers) AWS still wouldn't have spawned without it. Think of it as a pivot, even though they still kept amazon retail.
I'm not really sure what your YC comment has to do with things.
Further more, even if amazon retail still isn't profitable (I haven't checked the numbers) AWS still wouldn't have spawned without it. Think of it as a pivot, even though they still kept amazon retail.
I'm not really sure what your YC comment has to do with things.
Its every startups story that they are going to lose a bunch of money and eventually somehow make enough money to justify their evaluations. Not only hasn’t it happen with any YC company, nor has it happen with most of the money losing tech darlings like Uber, Lyft, Dropbox, Mongo,ElasticCo, etc. I believe that Amazon retail is profitable or could be anytime they chose, but not enough to justify Amazons valuation in the foreseeable future. Of course AWS is a different story.
That's simply because being profitable means you don't have anything better to do with your money, which signals to investors that you don't see any more growth opportunity. Mongo/elastic could both become profitable pretty quickly if they needed to (by slowing down hiring and expansion) but they don't do that because they're trying to grow as fast as possible, and they have enough money in the bank to sustain loses. Uber/lyft I think are fucked, but that's a different story.
Think of it this way. What do rich people do with their excess money? They invest it. So if you're a company like Mongo/elastic, what do you do with your excess money? Well, invest it back into the business. Both of these companies have years of runway before they go broke or have to go profitable, so it doesn't make sense for them to try and be profitable when there is still so much of the market left in the open.
Think of it this way. What do rich people do with their excess money? They invest it. So if you're a company like Mongo/elastic, what do you do with your excess money? Well, invest it back into the business. Both of these companies have years of runway before they go broke or have to go profitable, so it doesn't make sense for them to try and be profitable when there is still so much of the market left in the open.
The sales "day", at least for the West, is a week (maybe two?) when everything is on sale but the transactions are held as pending until the sale day.
It is very annoying because the discounts are usually 1-2% (again as a westerner, may well be different for Asia) and it means you might have to wait a week or two for the product to ship.
I have asked stores if they can bill me full price and ship immediately and they say no.
So its really a marketing con to consolidate one or two weeks worth of sales into one day and then proclaim they had such a huge salsa day.
Imagine if Amazon billed two weeks of sales right on Black Friday. The numbers would be insane.
It is very annoying because the discounts are usually 1-2% (again as a westerner, may well be different for Asia) and it means you might have to wait a week or two for the product to ship.
I have asked stores if they can bill me full price and ship immediately and they say no.
So its really a marketing con to consolidate one or two weeks worth of sales into one day and then proclaim they had such a huge salsa day.
Imagine if Amazon billed two weeks of sales right on Black Friday. The numbers would be insane.
Their model is different though.
Alibaba has almost no self held sales. While Amzn only include profit from 3rd party as revenue, not sales from 3rd party (AFAIK).
Alibaba has almost no self held sales. While Amzn only include profit from 3rd party as revenue, not sales from 3rd party (AFAIK).
I assume a lot of that Alibaba volume is them collecting smaller commission amounts on a larger number of transactions? Would be interesting to know what the gross profit margin is on their revenue figure for the day.
Alibaba is an advertising platform. They're not a retailer like Amazon. The one day sales event is gross merchandise volume, not Alibaba's actual revenue. The parent comment is comparing apples and oranges.
eBay for example did $94b in gross merchandise volume in 2018, their revenue was $10.7b.
eBay for example did $94b in gross merchandise volume in 2018, their revenue was $10.7b.
LOL so just forget any changes to inventory commingling and counterfeit merchandise.
Why would you think that your comment is relevant to their sales going up 20%? Maybe they would have gone up more if they didn't have a counterfeiting problem, or maybe they would have gone up less, I dunno.
But fundamentally sales going up has nothing to do with counterfeit goods.
But fundamentally sales going up has nothing to do with counterfeit goods.
Well, the blind eye they seem to turn towards this seem to be rather unimpactful for their bottom line I guess...
1) Close to 70% of Amazon operating income once again can be attributed to AWS.
Consolidated operating income: $3,084 m AWS operating income: $2,121 m
2) AWS revenue was $8.3B for the quarter, 37% more than the same quarter last year.