You can justify Apple's valuation through cash flow. You can't do it with Amazon. However it has always traded at a high valuation. Lets suppose it becomes the size of walmart which close ~500 bil in revenue. On the retail end their margins aren't really any better. So that is ~300 billion dollar business. That would mean AWS + prime video/music + amazon ads are worth 700 billions?
If Amazon's growth rate decelerates by 1% each year for 10 years, they'd end up with ~$1.7 trillion in revenue, more than 3x walmart. That's more in line with what Amazon shareholders are expecting with the current valuation (i'm not one of them)
That seems very hard to believe. Trying to find more info on where those numbers came from, appears the NPD Group looked at 4 million receipts?
How do the segments that would avoid walmart not make up more than 5% of the US population? Those who are morally/politically against walmart, the very wealthy (likely have someone go for them, or don't shop at walmart), physically incapable, or not physically near (e.g. young people in cities with no car)
They are uniquely positioned to capture a huge chunk of internet traffic for enterprises. They are constantly releasing new features on AWS that greatly simplify the building huge projects. As time goes on, I think Amazon will have a huge number of major companies totally locked into AWS.
A quick google search show Apple had a profit of $11.5B last quarter while AWS alone brought in a net income of $1.4B, which is an increase of like 80% YoY. If they can maintain that level of growth for four years, then AWS alone will be be as profitable as all of Apple is now.
Amazon is much more willing to make deals to protect IP than Google or Microsoft have been (in my experience). Google will flat out admit that they will use your company data to improve their product offerings (which are available to your competitors) and will not acquiesce on that point.
They've been losing market share for years, to Azure and Google. Their profits haven't gotten squeezed. Their operating margins continue to be robust as ever.
Most of the services AWS offers, are software services that have extreme margins. Competition isn't going to materially cut into that (which is why after all of these years of fierce competition, it hasn't).
> They've been losing market share for years, to Azure and Google.
Most analysts would disagree with you, as would I. They haven't been losing market share to anyone -- the market is just growing around them. There is very little overlap between Azure and AWS customers. MS has been knocking it out of the park growing Azure, but it's mostly been customers who would have been doing Windows in the datacenter if not for Azure. They aren't capturing much of the non-Windows market, other than as ancillary services that go along with Windows services that get moved to Azure.
Google is competing directly with AWS, and what they offer is technically superior, but they're still terrible at selling to the Enterprise, which is where all the money is. Sure, Google is getting a lot of small shops with a few developers, but all the real money is going to AWS, who is getting really good at selling to the enterprise, a hell of a lot faster than Google is.
They have competitors who want you to believe their products are as good or better. In my experience, AWS's competitors don't even have a solid understanding of what makes AWS successful, and try to imitate a subset of their features. In the long term they might catch up, but it will take cultural change.
(Microsoft has been making up for this by using their sales channel to port their existing customer base to Azure. This has worked out great for them, but their customer base is finite and aging.)
I like it because their (every growing) product suite allows me to bring products to market incredibly quick. Their blog has lots of really good examples of typical use-cases which has served as the foundation of many of my projects.
The valuation doesn't have to do with handling as much cash as WalMart.
The valuation has to do with this idea that Amazon will inevitably kill everything else including WalMart and end up the only way anybody can buy things or do business. It sure as hell hasn't built this valuation on the back of dividends to shareholders. You are taking a ride on a collective fantasy that there can exist a company that kills all other companies and somehow inherits their business without obliterating society as we know it.
Or, possibly, that there can be a cancer so big that it becomes the person and takes over doing everything that they do?
It's definitely a fantasy. Not Amazon's intentions: they're absolutely out to do this wherever possible, and it colors the attitude of Amazonians and dovetails with the political reality of the USA as it currently stands. The fantasy part is that it doesn't end in tears. Eventually Amazon must stop growing, if for no other reason than society will collapse and there will be no more customers for them to service, as there won't be jobs at Amazon to support 'em and government welfare will not be able to give the jobless people enough money to continue to buy things from Amazon.
That's already beginning to happen, but until then—there's a trillion dollar valuation, and the world of capital cries 'play on!'.
Or you could try and convince Amazonians NOT to kill everything else? But I don't think that'll get far: it's their culture and, as I said, that's the only reason for the valuation. People assume Amazon will continue to win.
AWS and their ad business are projected to generate $31 billion in operating income for fiscal 2021.
Those two businesses are worth a likely $600b to $1t depending on how aggressive you want to be on the multiple. That's three to four years out, however that's how the market typically treats Amazon (forward expectations of growth, not the prior 12 months earnings). They're richly valued today, no question, and it's quite plausible they'll actually grow into their current valuation in time (the market cap today pulls at least five years of growth forward to the present imo; who knows if AWS and advertising will keep going as anticipated).
The retail business will end up being by far the least valuable part of the Amazon empire. Whenever the day comes that these pieces are split off, particularly AWS, the retail business won't end up being worth more than Walmart.
I'd say the bias is the other way. Apple is a one trick pony that is only growing through raising prices, in a market where their value added vs competition is becoming very thin. Not convinced their margins are sustainable in the long term.
Amazon on the other hand, between cloud and online retail, not only still has room to grow, and is building a moat around their business through the sheer scale of their infrastructure (logistics + datacenters).
Both are fairly pro-cyclical though (retail & luxury products). If anyone thinks the peak of the cycle is close...
>I'd say the bias is the other way. Apple is a one trick pony that is only growing through raising prices
For a company that started from computers, moved to media players, added music stores, added smartphones, added app stores, added tablets, add cloud services, added watches, and managed even the smallest of those categories (e.g. watches) to be the size of a Fortune 500 company (4-6 billion) and growing, it's rich calling it an "one trick pony".
Sadly, that man is dead. The accountant they have running things now is very good at making money, but not very good at creating new products. They are already selling $999 phones, it's hard to see how he can squeeze any more money out of the iPhone.
They can charge 1100 for the phone. Their revenues went up not because they are selling more phones, but Average Selling Price went up. If people are willing to pay 1k why not 1.1 or 1.2. At some point people will stop, but you can find the price point that maximizes profit.
So exactly what in the foreseeable future is going to be more impactful than the cellphone (not necessarily the iPhone)? What other product is owned by close to 2/3rds of the worlds population and growing? (https://www.statista.com/statistics/274774/forecast-of-mobil...)
What other consumer electronics company is doing anything innovative?
It has nothing to do with apple being better or worse than other consumer electronics company.
It instead has everything to do with the fact that high end consumer electronics is only so big of a market, and is one that Apple has almost entirely tapped out.
Apple won the market, overwhelmingly so. But they can't win twice as hard, when they've won already as much as they can.
Many investors expect augmented reality to eventually have as much impact as smartphones. That may not be realistic, but the current Apple valuation is at least partly based on the expectation that it will eventually become an AR market leader.
Perhaps so, if someone can figure out how to integrate a high quality AR display into something that looks like a regular pair of eyeglasses / sunglasses. But the technical challenges are huge and I expect that will take decades.
>They are already selling $999 phones, it's hard to see how he can squeeze any more money out of the iPhone.
Several ways. They're actively looking into health sensor integration, with third party (and their own) devices, medical records, and with the Apple Watch as a continuous sensor. That's a huge market, even more lucrative than smartphones.
Second, they're better poised than anybody in this IoT thing, with their home automation platform.
Third, they are entering the living room, starting with the speakers, tv, etc. When they get serious with this (especially since they also combine it with their home automation) they'll have another nice market to tap.
Fourth, they've long since licensed Car Play, and they also have their own autonomous car project under continuous development. Whether in partnership with a car company or on their own, they can do quite well with e.g. their own electric city car.
Fifth, they also work heavily (and have made acquisitions etc) in AR / VR technology. If they put out some device, it wont be a prototype for enthusiasts like the one's we've seen, it will sell like crazy.
Which is sort of a Catch 22 for them. If they invested in actually making the services good and cross-platform, people would probably pay to use them on non-Apple hardware. On the other hand they use services specifically to drive sales of Apple gear. But I don't actually no anyone who says, "I got an iPhone because iCloud is amazing!". Their internet services are basically table stakes.
I know many people that have iphones so they can use iMessage. Doesn't mean they don't use other apps, but imessage is pretty common around my parts and a distinct reason some people don't buy android phones.
I don't actually no anyone who says, "I got an iPhone because iCloud is amazing!"
There is precedent, though.
iTunes on Windows brought a lot of revenue in to the iTunes store, and convinced a number of people to try the iPhone.
I'm not sure it's a good time for Apple to expand its other offerings cross-platform, though. Its services are good, but perhaps not everything they should be. And supporting a small ecosystem of machines is a lot different than trying to support the eighty brazillion variations of Windows and Android machines.
> Even services is a derivative of iphone sales, no one is using them on non apple hardware.
Not true. In fact, you can do a whole lot with iTunes on Windows. Another fun fact - the decision to launch iTunes on Windows was a major turning point in Apple's growth.
> the decision to launch iTunes on Windows was a major turning point in Apple's growth.
How much of this is because iTunes is any good (not very much) and more because it uncoupled a good, affordable product (the iPod) from an expensive product that didn't justify its price tag to most people (the Mac)
Seeing GM, who has a gigantic infrastructure that is paid off being worth 60B, but Apple has... fans? Patents?
Tech if anything can be changed in years.
I believe in Amazon and Google due to the sheer use from consumers and business, but Apple is not like these.
They have a segregated population of non-business consumers using 1 product in an increasingly saturated and competitive market. I dont know if I'm allowed to say this on HN-
My (work) iphone has significantly less features than my pixel/android. Apple needs to innovate NOW.
There are no locks because there are no doors, only walls.
You can't seriously suggest that leaving Apple has no costs, that leaving a tightly integrated ecosystem that doesn't work well with anything else outside its walls is a low barrier to exit.
After 7 years, I switched from Android to iPhone 26 months ago. The only thing I missed was the Swipe keyboard, but then I downloaded the Google keyboard for iPhone, and I was satisfied.
Today, I still use FB Messenger, Text (iMessage by accident, but I just think its Text), Gmail (+ Calendar), Spotify, Venmo, Dropbox, FB Events and a random suite of utility applications that exist on both platforms (Chess Clock, etc).
My Androids were more robust and in 7 years never broke. My iPhone has broken it's screen twice. It is harder for me to chrome cast onto my roommate's TV. My iPhone is less configurable. My iPhone cost more.
Next time I buy a phone, I will not have any lock-in, but I'll buy a used iPhone. No questions asked. I can't put my finger on why, but the experience with the iPhone has been that good.
What can't you do on iPhone? Squeeze the phone to get a shitty assistant? I mean not that Siri is better but I seriously ask myself wtf people are doing with their phones to produce such comments.
> My (work) iphone has significantly less features than my pixel/android. Apple needs to innovate NOW.
Maybe you are just not the target market? Maybe getting a feature right counts more to Apple than implementing a dozen badly?
> [Apple] have a segregated population of non-business consumers using 1 product in an increasingly saturated and competitive market
In my family, 4 of 4 people use an iPhone. The next time someone upgrades, it will be an iPhone. Other vendors are not even considered. This is what Apple’s competition is up against. My family is in the Apple ecosystem and we like it there.
We have iPads, MacBook Pros, an iMac, are subscribed to Apple Music and pay for iCloud storage. It is an investment rather than an expense because of all the time Apple’s ecosystem saves us – and do I say it – all the joy it brings.
Yes, everything Apple offers may have open-source competition and I could set it up myself. Yes, I could root Android phones to wipe bloatware and stop Google from sniffing around. Yes, I could babysit Windows and be the family’s technician. Indeed, in my teenage years it was nice to tinker around with stuff for hours. But now I just want everything to work and get on with things. Apple’s the best choice for us. And apparently for many, many others, too.
My guess is that the grandparent is just commenting on working conditions inside parts of the Amazon org, the details of which are well-publicized at this point.
True, but the GP specifically called out the difference between eps and share price of the two companies "interesting", which makes it looks like share price is an interesting number independent of the number of shares issued. It is not.
Earning per share and cost per share are useful to look at as a pair regardless of the number of shares issued. It's the return on capital. Tells one something regardless of market cap.
Revenue 52.89B 39.34%
Net income 2.53B 1186.29%
Diluted EPS 5.07 1167.5%
Net profit margin 4.79% 821.15%
Operating income 2.98B 375%
Net change in cash 2.92B -
Cash on hand 19.82B 50.14%
Cost of revenue 30.63B 30.62%
Apple
Revenue 53.26B 17.3%
Net income 11.52B 32.14%
Diluted EPS 2.34 40.12%
Net profit margin 21.63% 12.66%
Operating income 12.61B 17.12%
Net change in cash -13.09B 483.36%
Cash on hand 31.97B 72.16%
Cost of revenue 32.84B 17.64%
Revenue for Amazon is climbing faster than for Apple. And Amazon's cost of revenue is growing significantly slower than revenue while Apple's costs of are growing slightly more than revenue.
Could someone explain the math here. So amazon is worth almost 500 times their income!? That doesn't make any sense even if they are growing like crazy and investing their profits or something.
They traditionally operate on low net incomes so they can kill other products with low or negative margins, and own entire categories, instead of wasting funds paying taxes and shareholders.
Can someone explain whether "Diluted EPS" / Diluted Earnings Per Share is significant in valuing a stock, and also how that number is calculated and used in investing?
Amazon's #s in this regard are over 2X Apple's but there is a %age that is showing 1167% for Amazon vs 40.12% for Apple. What does this mean?
Amazon Diluted EPS 5.07 1167.5%
Apple Diluted EPS 2.34 40.12%
sure, but the problem is that there are no legitimately recognized avenues for doing so.
politicians won't want to be seen as "anti business" because they know who funds their campaigns. non-elected regulators are already captured, so there's no movement possible there. workers have no real power at present -- and, if they tried to exercise power anyway, they'd be branded as radicals without any legitimate perspective on policy. consumer boycotts are a thing of the distant past, and are unlikely to reach the size necessary to inflict the requisite amount of damage in any event. smaller competitors may be living hand-to-mouth as far as their businesses are concerned, so they're in no shape to take on social or economic change.
all of this is BEFORE we think about whether amazon is a genuine monopoly that threatens competition in rigorous terms. i'm of the view that it is monopolistic in its intent, but the existence of a plurality of options for any given commodity which it produces/sells makes it hard to build a case for it being a living monopoly if you're talking to someone who is pro-amazon or pro-big business.
I'm curious where you feel Amazon has a monopoly? Google and Microsoft offer compelling alternatives for cloud infrastructure and the retail market has tons and tons of competitors. I have a lot of concerns about the power corporations like Amazon, but I'm not sure I see where the monopoly exists.
Amazon undoubtedly benefited from google attracting the bulk of regulatory scrutiny which is in large part because they have the same business model as newspapers and they didn't much appreciate it.
Okey Dokey, so I'm assuming Amazon has to reach singularity in order to sustain that value?
Something is not quite right. We are reaching significant highs and the US dollar is getting stronger. Several economies are collapsing mainly due to their currency crashing against the USD (Turkey, Argentina, Egypt, Tunisia, Iran, etc...).
I'll probably fail to find the comment but I was very bullish on tech stocks a year or more earlier. I'm still VERY bullish on them. Albeit I have to say that the risks now for a substantial correction is starting to go up.
Here are two possibilities:
1. Things go back to normal. Tech Stocks go up a bit more and then we correct. Possibly getting into a bear market. This time is not different.
2. This time it is different. Tech stocks carry on the bull market. Everything is a bull market even the US dollar. This crashes pretty much the rest of the world stocks and economies. The US economy and dollars crashes several economies and makes a come back as the most powerful economy on the planet.
How does the USD getting stronger lead to economies in other countries collapsing? This is a real question, I really don't understand how or why this would happen.
It costs them more to import goods, because the goods are priced in USD. They may not actually be priced in USD, but as of now, the USD is still the world currency reserve, so most international trade is at least indirectly based on it's perceived value.
Well, these economies (I live in one, travel to another one) have already shaky economies and weak currencies. Let's say you mainly export in EUR but you import most of your living expenses in USD. USD gets stronger and EUR goes down.
Now you might think it is just a few "percentages" but remember these economies are already on shaky grounds so this might trigger the crisis. Certainly, the USD here is not to blame (I don't really believe in all the jewish money central bank crap). But if the USD goes stronger along with the US economy it might destabilize several other countries that have yet to reach the trigger point.
In Turkey many businesses were taking out loans denominated in USD or Euros instead of local Turkish Lira.
"The lira sell-off has also meant Turkey's banks are seeing more loans go bad as borrowers struggle to pay off euro- and dollar-denominated debt. For years, Turkish companies borrowed in hard currency, drawn by lower interest rates, but the lira crisis has made it more expensive to repay that."[1]
Weak economies often have some inflation and thus high interest rates. During the time of almost zero interest rates in the US, people borrowed Dollars and not their local currency to get money cheaper.
The problem arises now that the value of the Dollar is rising. People have to exchange their local currency back into Dollars to pay back their credit loans. They have to pay more than they expected which can be a problem.
To out-pedanticize (?) your pedantry, by convention currencies are valued against other currencies - this is why the tickers at the bottom of Bloomberg show USD-EUR, USD-CNY, et cetera.
In the context of this thread, you're expected to interpret "the value of the Dollar is rising" as "it costs more Turkish Liras to buy a dollar today than it did yesterday."
I feel like this is missing his point, and he was actually asking if the change in currency value was mainly due to America getting stronger, or due to the other countries getting weaker. So far this comment thread has been fairly US-centric, and I believe he was suggesting it's more that these other countries are just failing, rather than the US doing particularly well.
Currency values don't necessarily correspond to the strength or weakness of a country. Sometimes countries that are strong in terms of GDP, military power, or other metrics intentionally drive down their currency value in order to improve their balance of trade.
Most of the other comments have explained it, but I'll also point out that in many developing countries or ones that have recent crashes in their economy, their unofficial-official currency is the US Dollar or, less commonly, the Euro.
USD and EUR are often stand-ins for the country's currency for various reasons. This leads to devaluing of the currency and eventually laws on money exchanging and import of other currency (see also: China).
It's partly that a strong USD means that people are buying dollars or moving money to the US. More money to the US means less money to others.
It's partly borrowing. Lots of developing nations' loans are denominated in dollars. Meaning that they have to pay back the money in dollars since lenders worry that developing nations/peoples would just devalue their money to pay back their loans if the loans were in pesos, liras, etc. As the USD gets stronger, the loans become more expensive.
Mexico had a scare just 2 years ago which Trump's election and the USD gaining a lot on the mexican peso. There were even talk of mexico collapsing if the USD continued to gain strength because of mexico dollar debt issuances.
I don't think the guys on Washington really understand the severity. Tech is still new and machine learning is doing wonders but not merging universes (as of yet).
I think something very different needs to happen. Commodity monopolies are different than platform monopolies. Additionally, I can't think of an example where any retail monopoly has been broken up.
I am still unsure if breaking these companies up in a vertical way would actually result in any benefit to the public.
I've been hearing about the USD causing issues with economies such as Turkey recently from several sources.
As far as I can tell it's because a lot of loans in Turkey were backed by USD. Now that the USD is a lot stronger it's causing loan defaults in Turkey.
Can someone chime in who has a better understanding of the current situation? It sounds really interesting and complex.
Not an expert of the current situation. But the Asian Financial Crisis in 1998 was caused by something similar.
In that case, people were borrowing in USD due to much lower interest rates in USD and stable/fixed exchange rates. These loans were used to finance property and infrastructure for exports. However, these loans were also financing lots of purchases for imports, so the current account deficit in these countries got worse and worse, until inflation happened and debt payments shot up, causing firms to default and creating an economic collapse.
It's not quite as simple as it just being the USD's strength. In Turkey's case, they are highly leveraged and have probably spent above their means for the last decade whilst growth was also healthy. Now growth is so so, the USD is getting stronger making the debt ratio worse, there is relatively high inflation and consequently the loan markets are becoming tight for Turkey as people are becoming wary about repayments..
Edit: Erdogan's (Turkey's prime minister) strongman attitude, a perceived power grab as well as attack on independent journalism might be contributing too.
Turkey has an overheated economy. It's growth has outpaced its productive capabilities. Lot of people are painting this to be primarily Erdogans fault. That is far from true. Turkeys growth is due to the combination of foreign denominated investments and loans in both domestic and foreign currencies. The Turkish Central Bank has been surpassing interest rates despite high inflation rates to keep the credit flowing. Altogether, the economy is over-levereged and it was going through a corrective cycle from January. Normal, and healthy.
That being said, multiple geo-political situations have now pushed this correction into what is likely a recession. First, there is the situation in Syria. Aside from the domestic strains and frictions, this situation puts Turkey at odds with Russia and Iran. Second, after a failed coup attempt a paranoid and defensive Erdogan has consolidated power -- this can only increase uncertainty and risk. Finally -- the straw that broke the camels back -- the recent economic policies of US towards Turkey. Tariffs, threats, and likely more (according to the administration). This led to a sell-off of the lira against the dollar and euro. This has systemic effects as it increase the cost to finance any foreign denominated debt. What that means is that all Turkish businesses need to increase costs in order to maintain present profitability levels. Without foreign intervention -- or very good diplomacy by Turkey and EU -- this is likely beginning of a recession.
I strongly disagree with your portrayal of Turkey’s problems as not being in large part stemming from Erdoğan and his rule.
He has hollowed out the government and banking institutions of capable and educated, in favour of political functionaries, conspiracy peddlers, and other unqualified individuals.
That's right. The situation is quite complex with foreign debts that are hard to pay back. The situation gets worse with tariffs against Turkey hurting their ability to trade, which creates caution among investors. This in turn causes less demand for their currency, which makes things worse.
Econofact has some background and history that I found quite interesting and well explained:
According to http://usdebtclock.org/ the $ 21 trillion US national debt is now 114% of US GDP and about a third of that debt is held by foreign countries. Unfunded liabilities (medicare, social security, veterans benefits etc) is almost a million dollars per tax payer ($940K).
Either we are partying and leaving it to our children to clean up the mess or
arithmetic does not matter to the US economy.
I cannot make sense of it and I had exactly the same feeling in 2001 and 2008.
These are all pros, not cons, to Amazon's valuation. They are telegraphing the idea that Amazon will destroy everything that stands in its way, up to and including its own employees or even investors.
There is no kind of labor abuse or environment abuse in any sense that would not be taken as evidence of Amazon's character (and not a weakness). And again, this sociopathic behavior is what's being selected for by the market. Amazon abusing people and situations is good, according to the market.
I plan to start slowly getting out of tech stocks.
Since 2012, I've held stocks in Apple, Amazon, Google, and Tesla (also, Microsoft and Intel, but sold those). I was skeptical about Facebook, so didn't purchase.
I attribute my buying decisions to my knowledge gained from Hacker News. Thank you everybody:)
Back then, the everyday person didn't have a clue what these companies were doing. (My dad's friend was still betting on HP, and no one knew about AWS.)
Oil companies fail because they think they're in the oil business. When in fact, they're in the energy business.
Toys "R" Us went bankrupt because they thought they were a toy-selling company, instead of a child entertainment company. These companies fail to innovate.
The great thing about tech companies... innovation is in their blood. The problem is when that blood gets diluted and their purpose gets lost in "making toys" instead of "entertaining children".
As I said above, I'm looking to get out of tech stocks. Looking for multi-family property real estate options. Years ago I purchased and lived in a duplex, then sold.
Looking for opportunities providing cash flow, and a proven product that's been around for 1000's of years. If you know of anything, please see my bio.
> Toys "R" Us went bankrupt because they thought they were a toy-selling company, instead of a child entertainment company.
Well said.
There's a reason why the Lego store always is full of kids PLAYING, and Toys R Us felt like a Walmart that happened to stock toys instead of groceries.
> Oil companies fail because they think they're in the oil business. When in fact, they're in the energy business.
Correction, successful oil companies realize that they are in the financing business. Exxon Mobil has the uncanny ability to earn billions of dollars without selling a drop of their own reserves.
In this sense, the successful technology companies have realized that they are also in the financing business. This is why I think Apple and Microsoft will outlive Intel -- Intel innovates in their own market while Microsoft buys into any profitable market and can capitalize on the arbitrage the comes from being an established player.
Actually, Toys R Us went bankrupt through a buyout:
https://www.bloomberg.com/view/articles/2018-03-27/toys-r-us...
Basically, they were forced to take on a lot of debt to go private at a critical inflection point where competition was starting to undercut their pricing. Then they couldn't invest in anything else to fight their competition because they already had far, far, too much debt.
So I'd be skeptical to say there's something inherently wrong with non-tech stocks. You may have just lucked out and invested in tech stocks during one of the worlds largest bubbles (or just bull runs? Hard to say!)
> Toys "R" Us went bankrupt because they thought they were a toy-selling company, instead of a child entertainment company. These companies fail to innovate.
Not exactly [1]
"Toys "R" Us' debt problems date back to well before Amazon (AMZN) was a major threat. Its debt was downgraded to junk bond status in January of 2005, at a time when Amazon's sales were just 4% of their current level.
[...]
A year later the company was taken private by KKR, Bain Capital and real estate firm Vornado. The $6.6 billion purchase left it with $5.3 billion in debt secured by its assets and it never really recovered.
But much of the chain's resources were devoted to paying off that massive debt load rather than staying competitive.
When Toys "R" Us filed for bankruptcy in September 2017, it disclosed it had about $5 billion in debt and was spending about $400 million a year just to service that debt."
>Back then, the everyday person didn't have a clue what these companies were doing.
I don't think so. Groupon IPO'd in 2011, and it was definitely big with casual investors. I knew a lot of people who were looking at facebook when it IPO'd. Coincidentally, tech people seemed to be the biggest doom-and-gloomers for facebook. All I ever heard was how they were fudging their advertising numbers and how they would get exposed any day now.
Facebook IPO’ed in 2012. It was huge among investors especially retail. Meanwhile places like Reddit and Hacker News were the ones saying how bad the stock and company was.
"Alphabet" is not too far behind and let's face it Google has a significant entry space, communications control and intelligence and the other FAANGs also pay them.
Google don't seem to have the speculative product or consumer distribution badge to hang some risk off though even though they are in so much digital space. A great second quarter by them didn't help their shares.
Speculators/corporate traders push share prices, it doesn't depend on 19th-century dividends any longer.
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[ 2.9 ms ] story [ 231 ms ] threadApple welcomes Amazon to it's club https://t.co/eRkWs8LkZB
Amazon doesn't have slowing sales and increasing inventory problem like appl though.
https://www.cnbc.com/2017/04/12/nearly-every-american-spent-...
At some point you will start to asymptote out. 1.7 Trillion is more than walmart+Target+3 of 4 big box retailers.
That seems very hard to believe. Trying to find more info on where those numbers came from, appears the NPD Group looked at 4 million receipts?
How do the segments that would avoid walmart not make up more than 5% of the US population? Those who are morally/politically against walmart, the very wealthy (likely have someone go for them, or don't shop at walmart), physically incapable, or not physically near (e.g. young people in cities with no car)
They are uniquely positioned to capture a huge chunk of internet traffic for enterprises. They are constantly releasing new features on AWS that greatly simplify the building huge projects. As time goes on, I think Amazon will have a huge number of major companies totally locked into AWS.
A quick google search show Apple had a profit of $11.5B last quarter while AWS alone brought in a net income of $1.4B, which is an increase of like 80% YoY. If they can maintain that level of growth for four years, then AWS alone will be be as profitable as all of Apple is now.
Most of the services AWS offers, are software services that have extreme margins. Competition isn't going to materially cut into that (which is why after all of these years of fierce competition, it hasn't).
Most analysts would disagree with you, as would I. They haven't been losing market share to anyone -- the market is just growing around them. There is very little overlap between Azure and AWS customers. MS has been knocking it out of the park growing Azure, but it's mostly been customers who would have been doing Windows in the datacenter if not for Azure. They aren't capturing much of the non-Windows market, other than as ancillary services that go along with Windows services that get moved to Azure.
Google is competing directly with AWS, and what they offer is technically superior, but they're still terrible at selling to the Enterprise, which is where all the money is. Sure, Google is getting a lot of small shops with a few developers, but all the real money is going to AWS, who is getting really good at selling to the enterprise, a hell of a lot faster than Google is.
(Microsoft has been making up for this by using their sales channel to port their existing customer base to Azure. This has worked out great for them, but their customer base is finite and aging.)
Hype, and a general misunderstanding of an overly generic term (cloud) ?
The valuation has to do with this idea that Amazon will inevitably kill everything else including WalMart and end up the only way anybody can buy things or do business. It sure as hell hasn't built this valuation on the back of dividends to shareholders. You are taking a ride on a collective fantasy that there can exist a company that kills all other companies and somehow inherits their business without obliterating society as we know it.
Or, possibly, that there can be a cancer so big that it becomes the person and takes over doing everything that they do?
It's definitely a fantasy. Not Amazon's intentions: they're absolutely out to do this wherever possible, and it colors the attitude of Amazonians and dovetails with the political reality of the USA as it currently stands. The fantasy part is that it doesn't end in tears. Eventually Amazon must stop growing, if for no other reason than society will collapse and there will be no more customers for them to service, as there won't be jobs at Amazon to support 'em and government welfare will not be able to give the jobless people enough money to continue to buy things from Amazon.
That's already beginning to happen, but until then—there's a trillion dollar valuation, and the world of capital cries 'play on!'.
Or you could try and convince Amazonians NOT to kill everything else? But I don't think that'll get far: it's their culture and, as I said, that's the only reason for the valuation. People assume Amazon will continue to win.
Those two businesses are worth a likely $600b to $1t depending on how aggressive you want to be on the multiple. That's three to four years out, however that's how the market typically treats Amazon (forward expectations of growth, not the prior 12 months earnings). They're richly valued today, no question, and it's quite plausible they'll actually grow into their current valuation in time (the market cap today pulls at least five years of growth forward to the present imo; who knows if AWS and advertising will keep going as anticipated).
The retail business will end up being by far the least valuable part of the Amazon empire. Whenever the day comes that these pieces are split off, particularly AWS, the retail business won't end up being worth more than Walmart.
Amazon on the other hand, between cloud and online retail, not only still has room to grow, and is building a moat around their business through the sheer scale of their infrastructure (logistics + datacenters).
Both are fairly pro-cyclical though (retail & luxury products). If anyone thinks the peak of the cycle is close...
For a company that started from computers, moved to media players, added music stores, added smartphones, added app stores, added tablets, add cloud services, added watches, and managed even the smallest of those categories (e.g. watches) to be the size of a Fortune 500 company (4-6 billion) and growing, it's rich calling it an "one trick pony".
https://www.eetimes.com/document.asp?doc_id=1333633
Among other things, people buy Apple so that they won't be seen buying something more viable.
What other consumer electronics company is doing anything innovative?
It instead has everything to do with the fact that high end consumer electronics is only so big of a market, and is one that Apple has almost entirely tapped out.
Apple won the market, overwhelmingly so. But they can't win twice as hard, when they've won already as much as they can.
Several ways. They're actively looking into health sensor integration, with third party (and their own) devices, medical records, and with the Apple Watch as a continuous sensor. That's a huge market, even more lucrative than smartphones.
Second, they're better poised than anybody in this IoT thing, with their home automation platform.
Third, they are entering the living room, starting with the speakers, tv, etc. When they get serious with this (especially since they also combine it with their home automation) they'll have another nice market to tap.
Fourth, they've long since licensed Car Play, and they also have their own autonomous car project under continuous development. Whether in partnership with a car company or on their own, they can do quite well with e.g. their own electric city car.
Fifth, they also work heavily (and have made acquisitions etc) in AR / VR technology. If they put out some device, it wont be a prototype for enthusiasts like the one's we've seen, it will sell like crazy.
https://www.apple.com/newsroom/pdfs/Q2_FY18_Data_Summary.pdf
Even services is a derivative of iphone sales, no one is using them on non apple hardware.
Which is sort of a Catch 22 for them. If they invested in actually making the services good and cross-platform, people would probably pay to use them on non-Apple hardware. On the other hand they use services specifically to drive sales of Apple gear. But I don't actually no anyone who says, "I got an iPhone because iCloud is amazing!". Their internet services are basically table stakes.
There is precedent, though.
iTunes on Windows brought a lot of revenue in to the iTunes store, and convinced a number of people to try the iPhone.
I'm not sure it's a good time for Apple to expand its other offerings cross-platform, though. Its services are good, but perhaps not everything they should be. And supporting a small ecosystem of machines is a lot different than trying to support the eighty brazillion variations of Windows and Android machines.
Not true. In fact, you can do a whole lot with iTunes on Windows. Another fun fact - the decision to launch iTunes on Windows was a major turning point in Apple's growth.
How much of this is because iTunes is any good (not very much) and more because it uncoupled a good, affordable product (the iPod) from an expensive product that didn't justify its price tag to most people (the Mac)
It seems to me like colouring this with negative connotations is a bit obtuse; vertical integration is a strength, not a weakness
It also probably makes a larger profit on Macs than Amazon does in total.
This is why shorts on FAANG are so high.
Seeing GM, who has a gigantic infrastructure that is paid off being worth 60B, but Apple has... fans? Patents?
Tech if anything can be changed in years.
I believe in Amazon and Google due to the sheer use from consumers and business, but Apple is not like these.
They have a segregated population of non-business consumers using 1 product in an increasingly saturated and competitive market. I dont know if I'm allowed to say this on HN-
My (work) iphone has significantly less features than my pixel/android. Apple needs to innovate NOW.
Different people like different things. You liking things that aren't Apple is no stranger than me liking things that are Apple.
You can't seriously suggest that leaving Apple has no costs, that leaving a tightly integrated ecosystem that doesn't work well with anything else outside its walls is a low barrier to exit.
Today, I still use FB Messenger, Text (iMessage by accident, but I just think its Text), Gmail (+ Calendar), Spotify, Venmo, Dropbox, FB Events and a random suite of utility applications that exist on both platforms (Chess Clock, etc).
My Androids were more robust and in 7 years never broke. My iPhone has broken it's screen twice. It is harder for me to chrome cast onto my roommate's TV. My iPhone is less configurable. My iPhone cost more.
Next time I buy a phone, I will not have any lock-in, but I'll buy a used iPhone. No questions asked. I can't put my finger on why, but the experience with the iPhone has been that good.
Maybe you are just not the target market? Maybe getting a feature right counts more to Apple than implementing a dozen badly?
> [Apple] have a segregated population of non-business consumers using 1 product in an increasingly saturated and competitive market
In my family, 4 of 4 people use an iPhone. The next time someone upgrades, it will be an iPhone. Other vendors are not even considered. This is what Apple’s competition is up against. My family is in the Apple ecosystem and we like it there.
We have iPads, MacBook Pros, an iMac, are subscribed to Apple Music and pay for iCloud storage. It is an investment rather than an expense because of all the time Apple’s ecosystem saves us – and do I say it – all the joy it brings.
Yes, everything Apple offers may have open-source competition and I could set it up myself. Yes, I could root Android phones to wipe bloatware and stop Google from sniffing around. Yes, I could babysit Windows and be the family’s technician. Indeed, in my teenage years it was nice to tinker around with stuff for hours. But now I just want everything to work and get on with things. Apple’s the best choice for us. And apparently for many, many others, too.
Apple (AAPL) earned $11.04/share last quarter and trades for ~$228 today
Amazon (AMZN) earned $12.63/share last quarter and trades for ~$2,040 today
edit: formatting
Apple: 4,915,138,000
Amazon: 485,227,000
Amazon
Apple Revenue for Amazon is climbing faster than for Apple. And Amazon's cost of revenue is growing significantly slower than revenue while Apple's costs of are growing slightly more than revenue.They traditionally operate on low net incomes so they can kill other products with low or negative margins, and own entire categories, instead of wasting funds paying taxes and shareholders.
Or as Walter White says in Breaking Bad. "Corner the Market, then increase the Price. Basic Economics."
Amazon's #s in this regard are over 2X Apple's but there is a %age that is showing 1167% for Amazon vs 40.12% for Apple. What does this mean?
It's time for a new wave of trust busting.
politicians won't want to be seen as "anti business" because they know who funds their campaigns. non-elected regulators are already captured, so there's no movement possible there. workers have no real power at present -- and, if they tried to exercise power anyway, they'd be branded as radicals without any legitimate perspective on policy. consumer boycotts are a thing of the distant past, and are unlikely to reach the size necessary to inflict the requisite amount of damage in any event. smaller competitors may be living hand-to-mouth as far as their businesses are concerned, so they're in no shape to take on social or economic change.
all of this is BEFORE we think about whether amazon is a genuine monopoly that threatens competition in rigorous terms. i'm of the view that it is monopolistic in its intent, but the existence of a plurality of options for any given commodity which it produces/sells makes it hard to build a case for it being a living monopoly if you're talking to someone who is pro-amazon or pro-big business.
Something is not quite right. We are reaching significant highs and the US dollar is getting stronger. Several economies are collapsing mainly due to their currency crashing against the USD (Turkey, Argentina, Egypt, Tunisia, Iran, etc...).
I'll probably fail to find the comment but I was very bullish on tech stocks a year or more earlier. I'm still VERY bullish on them. Albeit I have to say that the risks now for a substantial correction is starting to go up.
Here are two possibilities:
1. Things go back to normal. Tech Stocks go up a bit more and then we correct. Possibly getting into a bear market. This time is not different.
2. This time it is different. Tech stocks carry on the bull market. Everything is a bull market even the US dollar. This crashes pretty much the rest of the world stocks and economies. The US economy and dollars crashes several economies and makes a come back as the most powerful economy on the planet.
Now you might think it is just a few "percentages" but remember these economies are already on shaky grounds so this might trigger the crisis. Certainly, the USD here is not to blame (I don't really believe in all the jewish money central bank crap). But if the USD goes stronger along with the US economy it might destabilize several other countries that have yet to reach the trigger point.
"The lira sell-off has also meant Turkey's banks are seeing more loans go bad as borrowers struggle to pay off euro- and dollar-denominated debt. For years, Turkish companies borrowed in hard currency, drawn by lower interest rates, but the lira crisis has made it more expensive to repay that."[1]
[1] https://www.cnbc.com/2018/08/03/reuters-america-turkeys-bank...
The problem arises now that the value of the Dollar is rising. People have to exchange their local currency back into Dollars to pay back their credit loans. They have to pay more than they expected which can be a problem.
In the context of this thread, you're expected to interpret "the value of the Dollar is rising" as "it costs more Turkish Liras to buy a dollar today than it did yesterday."
USD and EUR are often stand-ins for the country's currency for various reasons. This leads to devaluing of the currency and eventually laws on money exchanging and import of other currency (see also: China).
It's partly borrowing. Lots of developing nations' loans are denominated in dollars. Meaning that they have to pay back the money in dollars since lenders worry that developing nations/peoples would just devalue their money to pay back their loans if the loans were in pesos, liras, etc. As the USD gets stronger, the loans become more expensive.
https://www.ft.com/content/b0436678-4fa8-11e8-9471-a083af05a...
Mexico had a scare just 2 years ago which Trump's election and the USD gaining a lot on the mexican peso. There were even talk of mexico collapsing if the USD continued to gain strength because of mexico dollar debt issuances.
Amazon and Google are becoming more like a technology holding/investment company (like Berkshire).
I am still unsure if breaking these companies up in a vertical way would actually result in any benefit to the public.
As far as I can tell it's because a lot of loans in Turkey were backed by USD. Now that the USD is a lot stronger it's causing loan defaults in Turkey.
Can someone chime in who has a better understanding of the current situation? It sounds really interesting and complex.
In that case, people were borrowing in USD due to much lower interest rates in USD and stable/fixed exchange rates. These loans were used to finance property and infrastructure for exports. However, these loans were also financing lots of purchases for imports, so the current account deficit in these countries got worse and worse, until inflation happened and debt payments shot up, causing firms to default and creating an economic collapse.
As a result, Indonesia, Thailand, and South Korea had to get help from the IMF. http://www.wright.edu/~tdung/asiancrisis-hill.htm
Edit: Erdogan's (Turkey's prime minister) strongman attitude, a perceived power grab as well as attack on independent journalism might be contributing too.
That being said, multiple geo-political situations have now pushed this correction into what is likely a recession. First, there is the situation in Syria. Aside from the domestic strains and frictions, this situation puts Turkey at odds with Russia and Iran. Second, after a failed coup attempt a paranoid and defensive Erdogan has consolidated power -- this can only increase uncertainty and risk. Finally -- the straw that broke the camels back -- the recent economic policies of US towards Turkey. Tariffs, threats, and likely more (according to the administration). This led to a sell-off of the lira against the dollar and euro. This has systemic effects as it increase the cost to finance any foreign denominated debt. What that means is that all Turkish businesses need to increase costs in order to maintain present profitability levels. Without foreign intervention -- or very good diplomacy by Turkey and EU -- this is likely beginning of a recession.
He has hollowed out the government and banking institutions of capable and educated, in favour of political functionaries, conspiracy peddlers, and other unqualified individuals.
https://foreignpolicy.com/2018/08/22/how-turkey-dumbed-itsel...
Econofact has some background and history that I found quite interesting and well explained:
https://econofact.org/the-financial-and-economic-crisis-in-t...
Either we are partying and leaving it to our children to clean up the mess or arithmetic does not matter to the US economy.
I cannot make sense of it and I had exactly the same feeling in 2001 and 2008.
It's interesting to see market's reaction post management issues were brought to light.
[0] https://imgur.com/ZdRpdiZ
https://www.nytimes.com/2015/08/16/technology/inside-amazon-...
There is no kind of labor abuse or environment abuse in any sense that would not be taken as evidence of Amazon's character (and not a weakness). And again, this sociopathic behavior is what's being selected for by the market. Amazon abusing people and situations is good, according to the market.
Since 2012, I've held stocks in Apple, Amazon, Google, and Tesla (also, Microsoft and Intel, but sold those). I was skeptical about Facebook, so didn't purchase.
I attribute my buying decisions to my knowledge gained from Hacker News. Thank you everybody:)
Back then, the everyday person didn't have a clue what these companies were doing. (My dad's friend was still betting on HP, and no one knew about AWS.)
Oil companies fail because they think they're in the oil business. When in fact, they're in the energy business.
Toys "R" Us went bankrupt because they thought they were a toy-selling company, instead of a child entertainment company. These companies fail to innovate.
The great thing about tech companies... innovation is in their blood. The problem is when that blood gets diluted and their purpose gets lost in "making toys" instead of "entertaining children".
As I said above, I'm looking to get out of tech stocks. Looking for multi-family property real estate options. Years ago I purchased and lived in a duplex, then sold.
Looking for opportunities providing cash flow, and a proven product that's been around for 1000's of years. If you know of anything, please see my bio.
Well said.
There's a reason why the Lego store always is full of kids PLAYING, and Toys R Us felt like a Walmart that happened to stock toys instead of groceries.
Correction, successful oil companies realize that they are in the financing business. Exxon Mobil has the uncanny ability to earn billions of dollars without selling a drop of their own reserves.
In this sense, the successful technology companies have realized that they are also in the financing business. This is why I think Apple and Microsoft will outlive Intel -- Intel innovates in their own market while Microsoft buys into any profitable market and can capitalize on the arbitrage the comes from being an established player.
There is simply no easier way to make money than charging interest on something.
So I'd be skeptical to say there's something inherently wrong with non-tech stocks. You may have just lucked out and invested in tech stocks during one of the worlds largest bubbles (or just bull runs? Hard to say!)
Not exactly [1]
"Toys "R" Us' debt problems date back to well before Amazon (AMZN) was a major threat. Its debt was downgraded to junk bond status in January of 2005, at a time when Amazon's sales were just 4% of their current level. [...] A year later the company was taken private by KKR, Bain Capital and real estate firm Vornado. The $6.6 billion purchase left it with $5.3 billion in debt secured by its assets and it never really recovered.
But much of the chain's resources were devoted to paying off that massive debt load rather than staying competitive.
When Toys "R" Us filed for bankruptcy in September 2017, it disclosed it had about $5 billion in debt and was spending about $400 million a year just to service that debt."
[1] https://money.cnn.com/2018/03/15/news/companies/toys-r-us-cl...
[edit: formatting]
I don't think so. Groupon IPO'd in 2011, and it was definitely big with casual investors. I knew a lot of people who were looking at facebook when it IPO'd. Coincidentally, tech people seemed to be the biggest doom-and-gloomers for facebook. All I ever heard was how they were fudging their advertising numbers and how they would get exposed any day now.
Google don't seem to have the speculative product or consumer distribution badge to hang some risk off though even though they are in so much digital space. A great second quarter by them didn't help their shares.
Speculators/corporate traders push share prices, it doesn't depend on 19th-century dividends any longer.
Probably need a better marketing message.