Amazon Shares Exist "Bubble"?

According to the world clothing shoes and hats net, recently, the US technology "first share"

Trouble keeps on.

Not only did Trump accuse Amazon of "taking away American jobs", but some well-known investment companies such as green light capital, Nordic bank and Morgan Crick capital also expressed doubts about the rapid rise of Amazon's share price last year.

The above three agencies all say that there is a "bubble" in Amazon's share price, but Jamie Powell, a British columnist, believes that Amazon's bubble is not big.

Obviously, Amazon has a very high valuation.

Amazon's trading volume is 4 times that of last year's sales, which is 170 times the expected price earnings ratio in the next year.

If Amazon is liquidated, its net book assets will be only 4% of the market value of $680 billion.

According to analysts, Amazon's revenue is expected to reach $535 billion by 2023, in other words, 12% of the total retail sales in the US in 2017.

If Amazon's annual profit growth rate is 8%, Amazon will become a trillions of dollars in the near future.

Is this prediction too optimistic? Powell does not think so.

Powell first from Amazon.

(including e-commerce and traditional retail, Amazon Amazon member services, distribution business, etc.) analysis: last year, the retail business revenue accounted for 90% of the total revenue of Amazon, but also a loss.

Amazon's losses are actually due to the company's investment in more infrastructure, with a view to reducing it through economies of scale.

The cost of production and pportation improves the user experience of Amazon members and makes the third party sellers profitable.

This is actually not new. This is Amazon's early "flywheel effect".

In the retail business of Amazon, the retail business share of third party sellers increased from 21% to 30% in just three years, playing an increasingly important role.

In addition, based on the construction of infrastructure for many years, Amazon now provides pportation services for small online retailers, and charges 10% to 25% based on the size and distance of goods.

Amazon's members pay $99 a year to membership fees.

Amazon's membership has accounted for over 60% of all households in the United States.

Because members consider the membership fee of $99 as sunk cost, members spend two times on Amazon every year, about $1300.

From the perspective of cash flow, what is Amazon's performance? Powell points out that because of the obvious time difference between the sale of goods and the payment to suppliers (usually 80 days), Amazon can almost complete its operation through its own funds in the 25 years history.

But there are exceptions.

The last time Amazon used the stock market to obtain funds, it also dates back to 2003.

In the four seasons of 2017, Amazon's free cash flow amounted to $6 billion 500 million.

What did Amazon do with investors' money in 2003? Powell said: Amazon launched Amazon's cloud service (AWS) that year, and AWS has become one of the most profitable sectors of Amazon.

Since its inception, AWS's revenue has increased by 4.65 times, and its profit has increased six times.

Although competitors such as Microsoft and Google have entered the cloud service market one after another, the profit of AWS still increased by 39% last year.

In addition to retail business and AWS, Amazon has other businesses, including AI hardware Echo and last year's total supermarket.

Powell said: Last Christmas, Echo was one of the most popular gifts on Amazon, and now it occupies about 2/3 of the market share of the household voice control AI market.

Last year, Amason bought the whole food supermarket, and more importantly, saw the fresh food and daily necessities supply chain of the total food supermarket, which also marked Amason's attack on the offline retail.

Overall, Powell thinks Amazon's valuation is high, but it doesn't mean there is a bubble.

In the future, the regulation of Amazon may be more stringent, but it will not have too many negative effects on Amazon.

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