I'm not against regulation in principle but this is not a practical or even sensible proposal. Banning high P/Es is like banning stupidity (in this case the stupidity of investors). And anyone who bans stupidity is in essence, banning himself, or herself as the case may be.
Agreed, but personally on the basis of considering this “banning the ability to fail”–of which we need more–and “continued expansion of government economic control”–against which I am.
Ooh, a Yodesque sentence that isn’t Yodified. Thanks, proper grammar!
I think a reversion to Amazon's historical p/e of 60-100 should be expected. That would put the share price between $50-$100.
Look, companies built on low margins can't raise those margins (profits) without destroying their customer base. Just ask Ron Johnson (Apple, JCPenney).
Or ask Walmart from their experience a few years back when they tried to move their clothing lines a notch up. Just a notch, to Target levels, mind you.
It is very, very, very hard to move your brand upmarket. You basically have to wait until the generation that knows you as a discount brand starts to die off and the generation that knows you only as a prestige brand to enter their prime earning years. In short you have to wait for the market to forget you before you can reintroduce yourself as an upmarket brand. That's a long time in the profit doghouse.
I said it before, Amazon will turn this around, once they have everyone locked into buying from them, you will see free shipping go away and deep discounted prices will be gone, their pricing will be no better than anyone else's and they will begin turning a profit.
This is a corporate strategy to invest heavily now to show a loss. This will reduce the stock price and allow insiders to buy in more at low point. When the investment starts to reap profit, the stock will skyrocket again. Watch the insiders' move closely for the next 12 months.
I'm not against regulation in principle but this is not a practical or even sensible proposal. Banning high P/Es is like banning stupidity (in this case the stupidity of investors). And anyone who bans stupidity is in essence, banning himself, or herself as the case may be.
I see it more like how they regulate commercial advertising. You could say that commercials should be able to make whatever claims they want and if people are stupid enough to believe it, it's their problem but that has caused harm to consumers in the past and so they regulate advertising.
If a company proclaims they have a magic rock and the magic rock will perform a miracle when the magic becomes active in 10 years, investors can see it being worth $30b. The potential for fraud is in their claim. They aren't promoting any old rock, the whole basis of the valuation is in the claims of magic. If 10 years goes by and there has been no evidence of delivering on their promise then they are defrauding investors.
It's not the company that's valuing the shares but they're the ones delivering the claims that drive investor perception of what they're worth. I think a P/E cap would go some way towards making the markets a bit less speculative. Hugely speculative valuations have the potential to cause more damage because there's no cash to backup the speculation.
I see it more like how they regulate commercial advertising. You could say that commercials should be able to make whatever claims they want and if people are stupid enough to believe it, it's their problem but that has caused harm to consumers in the past and so they regulate advertising.
If a company proclaims they have a magic rock and the magic rock will perform a miracle when the magic becomes active in 10 years, investors can see it being worth $30b. The potential for fraud is in their claim. They aren't promoting any old rock, the whole basis of the valuation is in the claims of magic. If 10 years goes by and there has been no evidence of delivering on their promise then they are defrauding investors.
It's not the company that's valuing the shares but they're the ones delivering the claims that drive investor perception of what they're worth. I think a P/E cap would go some way towards making the markets a bit less speculative. Hugely speculative valuations have the potential to cause more damage because there's no cash to backup the speculation.
There are already laws against companies misleading investors both by hiding material information or disseminating false information. 99% of the time though, ridiculously high stock prices is the investors' fault not the company's.
This is such a lopsided and naive view of why Amazon is not making money. So far gone there is no point in trying to reel you back in. Cut bait as they say in fishing. lol
Your view of Apple also is in the same category... limited and naive.
I don't defend Amazon and am neither really for nor against them. Just explaining that there *is* a rationale there whether anybody (including myself) chooses to agree with it or not.
I'm fairly certain the shoe on the average AI'rs foot would be different if Apple saw a huge opportunity in the future that they believed could net them a $2,000,000,000,000 and they chose to invest their entire saving of @$150,000,000,000 in it. On that year, assuming Apple 'made' 50 bil from products- they would post a staggering loss (probably the biggest in history) of $100,000,000,000 If data showed they were well poised and hitting landmarks to capture that $2,000,000,000,000 a year market, their shares would go up and their PE would be astronomical. If they actually succeed in capturing the market it was Apple's boldest and biggest success to choose to lose 100 billion dollars in a year. Anyone who invested in them would be staggeringly rich. If they fail, there's a lot of people left with nothing. Amazons staggering revenue growth year over year has shown it is on a steady path, it has without question sacrificed taking profits along the way.
I am not invested in Amazon because I think it is too risky, and largely because I simply don't want them to succeed even though they show continued growth. If Amazon does succeed and their revenue trends continue, when they do stop expanding they are going to pretty much be the only company standing. Blech. I invested quite heavily in Apple prior to the '6 buildup' and am enjoying some success with that. I admit it has nothing to do with fundamentals, other than I am fundamentally counting on people to be irrational. Apple does have great fundamentals, and even better products, but neither are going to add up to the ludicrous valuation and pop I believe Apple shares are just starting to enjoy. It is the 5 all over again. Stock will go nuts, people are going to absolutely love the 6 and it will have record sales. Stock will adjust downward out of the stratosphere when Wall Street does the math. Hopefully I am wrong and I would be happy to be wrong. I'll have made a very nice ROI, and all other Apple shareholders will be driving Ferrari's within a few months. Win/win.
I would love it if you could educate me and improve my naive views. Maybe tell me what a company can do with its income other than taking profits, reinvesting, or returning to investors (yes, where 'litigation' would certainly be a form of reinvesting).
Where a company chooses to draw its line between profits and reinvesting is a key question. Slumlords want to take 100% profits without reinvesting in their product, Amazon wants to reinvest 100% whether it makes or loses money. I think Apple has a very good balance, maybe a little on the cautious side (they were way too skewed previously, but dividends and buybacks were absolutely a balancer).
I don't defend Amazon and am neither really for nor against them. Just explaining that there *is* a rationale there whether anybody (including myself) chooses to agree with it or not.
Of course there is a plan out there and certainly, there is no shortage in the number of interpretations (like yours). The question is whether the plan works or not. It is not working and people are starting to clue in. ?
The top line means nothing when there is nothing left on the bottom line.
Quote:
Originally Posted by Frood
I'm fairly certain the shoe on the average AI'rs foot would be different if Apple saw a huge opportunity in the future that they believed could net them a $2,000,000,000,000 and they chose to invest their entire saving of @$150,000,000,000 in it. On that year, assuming Apple 'made' 50 bil from products- they would post a staggering loss (probably the biggest in history) of $100,000,000,000 If data showed they were well poised and hitting landmarks to capture that $2,000,000,000,000 a year market, their shares would go up and their PE would be astronomical. If they actually succeed in capturing the market it was Apple's boldest and biggest success to choose to lose 100 billion dollars in a year. Anyone who invested in them would be staggeringly rich. If they fail, there's a lot of people left with nothing. Amazons staggering revenue growth year over year has shown it is on a steady path, it has without question sacrificed taking profits along the way.
This illustration (outlandish IMO) mixes timelines. Apple is established, when Amazon started it had nothing. So for the past 18+ years it has been stringing everyone out. It's always on the come with no definition of when it will be ready. If you've ever managed a sales department, the low performers will keep telling you the business is just about to cut loose for as long as you let them.
Quote:
I would love it if you could educate me and improve my naive views. Maybe tell me what a company can do with its income other than taking profits, reinvesting, or returning to investors
That is a pat statement, sort of like born, live, die. Can't argue with basics. However, it needs to be applied to the appropriate situation. No Main Street business could operate the way Amazon has. All Amazon has succeeded in doing is create a false economy and diverted what should have been profits to local businesses to shareholders and insiders in the form of overvalued shares... think Enron.
The naivety comment refers to your statement "If Amazon stopped reinvesting the 4 bil a year they do, that money would go right to their bottom line. So they could bank a profit of 4,000,000,000 minus the 300 mil... or show a profit of 3.7 billion."
Really? Cashflow that is required to service expenses,overheads and debt would magically turn into profit just like turning off a tap?
Comments
Agreed, but personally on the basis of considering this “banning the ability to fail”–of which we need more–and “continued expansion of government economic control”–against which I am.
Ooh, a Yodesque sentence that isn’t Yodified. Thanks, proper grammar!
I think a reversion to Amazon's historical p/e of 60-100 should be expected. That would put the share price between $50-$100.
Look, companies built on low margins can't raise those margins (profits) without destroying their customer base. Just ask Ron Johnson (Apple, JCPenney).
Or ask Walmart from their experience a few years back when they tried to move their clothing lines a notch up. Just a notch, to Target levels, mind you.
It is very, very, very hard to move your brand upmarket. You basically have to wait until the generation that knows you as a discount brand starts to die off and the generation that knows you only as a prestige brand to enter their prime earning years. In short you have to wait for the market to forget you before you can reintroduce yourself as an upmarket brand. That's a long time in the profit doghouse.
I said it before, Amazon will turn this around, once they have everyone locked into buying from them, you will see free shipping go away and deep discounted prices will be gone, their pricing will be no better than anyone else's and they will begin turning a profit.
This is a corporate strategy to invest heavily now to show a loss. This will reduce the stock price and allow insiders to buy in more at low point. When the investment starts to reap profit, the stock will skyrocket again. Watch the insiders' move closely for the next 12 months.
I see it more like how they regulate commercial advertising. You could say that commercials should be able to make whatever claims they want and if people are stupid enough to believe it, it's their problem but that has caused harm to consumers in the past and so they regulate advertising.
If a company proclaims they have a magic rock and the magic rock will perform a miracle when the magic becomes active in 10 years, investors can see it being worth $30b. The potential for fraud is in their claim. They aren't promoting any old rock, the whole basis of the valuation is in the claims of magic. If 10 years goes by and there has been no evidence of delivering on their promise then they are defrauding investors.
It's not the company that's valuing the shares but they're the ones delivering the claims that drive investor perception of what they're worth. I think a P/E cap would go some way towards making the markets a bit less speculative. Hugely speculative valuations have the potential to cause more damage because there's no cash to backup the speculation.
I see it more like how they regulate commercial advertising. You could say that commercials should be able to make whatever claims they want and if people are stupid enough to believe it, it's their problem but that has caused harm to consumers in the past and so they regulate advertising.
If a company proclaims they have a magic rock and the magic rock will perform a miracle when the magic becomes active in 10 years, investors can see it being worth $30b. The potential for fraud is in their claim. They aren't promoting any old rock, the whole basis of the valuation is in the claims of magic. If 10 years goes by and there has been no evidence of delivering on their promise then they are defrauding investors.
It's not the company that's valuing the shares but they're the ones delivering the claims that drive investor perception of what they're worth. I think a P/E cap would go some way towards making the markets a bit less speculative. Hugely speculative valuations have the potential to cause more damage because there's no cash to backup the speculation.
There are already laws against companies misleading investors both by hiding material information or disseminating false information. 99% of the time though, ridiculously high stock prices is the investors' fault not the company's.
This is such a lopsided and naive view of why Amazon is not making money. So far gone there is no point in trying to reel you back in. Cut bait as they say in fishing. lol
Your view of Apple also is in the same category... limited and naive.
I don't defend Amazon and am neither really for nor against them. Just explaining that there *is* a rationale there whether anybody (including myself) chooses to agree with it or not.
I'm fairly certain the shoe on the average AI'rs foot would be different if Apple saw a huge opportunity in the future that they believed could net them a $2,000,000,000,000 and they chose to invest their entire saving of @$150,000,000,000 in it. On that year, assuming Apple 'made' 50 bil from products- they would post a staggering loss (probably the biggest in history) of $100,000,000,000 If data showed they were well poised and hitting landmarks to capture that $2,000,000,000,000 a year market, their shares would go up and their PE would be astronomical. If they actually succeed in capturing the market it was Apple's boldest and biggest success to choose to lose 100 billion dollars in a year. Anyone who invested in them would be staggeringly rich. If they fail, there's a lot of people left with nothing. Amazons staggering revenue growth year over year has shown it is on a steady path, it has without question sacrificed taking profits along the way.
I am not invested in Amazon because I think it is too risky, and largely because I simply don't want them to succeed even though they show continued growth. If Amazon does succeed and their revenue trends continue, when they do stop expanding they are going to pretty much be the only company standing. Blech. I invested quite heavily in Apple prior to the '6 buildup' and am enjoying some success with that. I admit it has nothing to do with fundamentals, other than I am fundamentally counting on people to be irrational. Apple does have great fundamentals, and even better products, but neither are going to add up to the ludicrous valuation and pop I believe Apple shares are just starting to enjoy. It is the 5 all over again. Stock will go nuts, people are going to absolutely love the 6 and it will have record sales. Stock will adjust downward out of the stratosphere when Wall Street does the math. Hopefully I am wrong and I would be happy to be wrong. I'll have made a very nice ROI, and all other Apple shareholders will be driving Ferrari's within a few months. Win/win.
I would love it if you could educate me and improve my naive views. Maybe tell me what a company can do with its income other than taking profits, reinvesting, or returning to investors (yes, where 'litigation' would certainly be a form of reinvesting).
Where a company chooses to draw its line between profits and reinvesting is a key question. Slumlords want to take 100% profits without reinvesting in their product, Amazon wants to reinvest 100% whether it makes or loses money. I think Apple has a very good balance, maybe a little on the cautious side (they were way too skewed previously, but dividends and buybacks were absolutely a balancer).
I don't defend Amazon and am neither really for nor against them. Just explaining that there *is* a rationale there whether anybody (including myself) chooses to agree with it or not.
Of course there is a plan out there and certainly, there is no shortage in the number of interpretations (like yours). The question is whether the plan works or not. It is not working and people are starting to clue in. ?
The top line means nothing when there is nothing left on the bottom line.
I'm fairly certain the shoe on the average AI'rs foot would be different if Apple saw a huge opportunity in the future that they believed could net them a $2,000,000,000,000 and they chose to invest their entire saving of @$150,000,000,000 in it. On that year, assuming Apple 'made' 50 bil from products- they would post a staggering loss (probably the biggest in history) of $100,000,000,000 If data showed they were well poised and hitting landmarks to capture that $2,000,000,000,000 a year market, their shares would go up and their PE would be astronomical. If they actually succeed in capturing the market it was Apple's boldest and biggest success to choose to lose 100 billion dollars in a year. Anyone who invested in them would be staggeringly rich. If they fail, there's a lot of people left with nothing. Amazons staggering revenue growth year over year has shown it is on a steady path, it has without question sacrificed taking profits along the way.
This illustration (outlandish IMO) mixes timelines. Apple is established, when Amazon started it had nothing. So for the past 18+ years it has been stringing everyone out. It's always on the come with no definition of when it will be ready. If you've ever managed a sales department, the low performers will keep telling you the business is just about to cut loose for as long as you let them.
That is a pat statement, sort of like born, live, die. Can't argue with basics. However, it needs to be applied to the appropriate situation. No Main Street business could operate the way Amazon has. All Amazon has succeeded in doing is create a false economy and diverted what should have been profits to local businesses to shareholders and insiders in the form of overvalued shares... think Enron.
The naivety comment refers to your statement "If Amazon stopped reinvesting the 4 bil a year they do, that money would go right to their bottom line. So they could bank a profit of 4,000,000,000 minus the 300 mil... or show a profit of 3.7 billion."
Really? Cashflow that is required to service expenses,overheads and debt would magically turn into profit just like turning off a tap?