Someone on the Amazon board was saying that Amazon was a house of cards, had never made any money, and probably never would:
I am curious of the thought process on if Amazon continues to lose money, break even or make virtually no net profit if they keep investing for the next 10,20,30 years? What is the investment philosophy for a company that could potentially go many more decades (they have gone two already) without ever really making a net profit or paying a dividend?
They went on to say that AWS would probably be commoditized. While some think AWS is a holy grail I think we are going to find it is not to dissimilar to any hosting provider that has come before and the end has not been spectacular (Exodus, rackspace). It is a highly commoditized and competitive space where prices rapidly fall.
And that Amazon’s operating cash flow and free cash flow were just bookkeeping tricks and weren’t real, and their PE is ridiculous, etc. Now I (Saul) have heard these same arguments for so long, for so many years, actually, I’m really fed up with them. Don’t they ever get tired of saying that and defying the reality of what’s actually happening? I responded to the post as follows:
The trouble is that all the smart guys were making these same objections, and proving by their calculations that Amazon had no real cash flow, back about nine months ago when I bought my position at $550, (it’s up 47% in those nine months to $808 today).
In fact the really smart guys were pointing out that Amazon had no earnings, and probably never would, when it was at $26 in June of 2006, and the really, really, smart guys were pointing this out when Amazon was at $6 in August of 2001.
I’m not exaggerating! They really were saying the same things back then!