At the beginning of every year I look back at my personal expenditures and budget. Since I order a lot of stuff from Amazon.com (from interdental toothbrushes to the microwave oven DH installed early this week) I decided to download ALL my Amazon orders. It took quite a while to figure out how to do this in a .csv format that I could save with Libre Office.
Since May 2000, I have ordered 787 items from Amazon.com adding up to $19,267. That includes the annual charge for Amazon Prime which gives free shipping. This averages over $1500 per year. My total for 2024 was over $2000 but that included capital expenditures such as a microwave oven, lounge chairs, Fire tablet and 2 fitness watches.
It’s amazingly easy to spend money on Amazon.com from the most prosaic items to things I never imagined until I saw them.
Amazon AMZN <+0.01% â–˛ said that it plans to invest $11 billion to expand its infrastructure in Georgia to support cloud computing and artificial intelligence (AI) technologies related to its cloud computing unit, Amazon Web Services (AWS).
AMZN is listed on the NASDAQ with a P/E ratio of 48 and no dividend. EPS up 52% in the past year. Is this sustainable? Is the price ridiculous or reasonable?
Go to Whole Foods. Pass through the “self checkout” line to scan your items. Bring your Amazon Prime shopping app up, load the “in store QR code” n swipe it over the scanner.
And walk out.
Your individual spending habits on Amazon.com has nothing to do with the valuation of the company.
$AMZN from 2019, it is still growing at 18%, from $280 B to $640 B; And still enjoys secular growth.
PE for Amazon is still not relevant. The FCF will be $11.5 to $12, and it will increase to $14 2025
Post COVID, $AMZN build UPS organically within the company, that excess capacity ran into issues after 2022 (like other retailers TGT, WMT), but it is getting resolved
Now they are also investing heavily in AI @AWS coming up with their own inference chip etc
Separately Ad business is having great margins
I see a world where $AMZN may be doing $1 T in sales (let it sink) and over $100 B in profits. At that world, they will start squeezing the margins to increase the profit. I already see this is happening under Andy Jazzy. They are getting disciplined on cap-ex and focused on increasing margins. so, there is a potential for higher profits.
It will not be a straight line. If the valuation extends extended I am ready to sell and if it gets cheap I am ready to buy.
The crazy thing is that not very long ago (like 10 years) AMZN’s P/E was like 900. I sold a bunch back then because it was unsustainable. A mid-six figure mistake.
We do what we have to. On 31-Dec sold some of the shares we acquired during 2018, 2019, mainly to reduce the overweighting on this individual name, on tech, and to manage tax. What if it runs to $300, should I be regretting this sale? Not really. You live with the decision.
Afterall, why are we buying, because some day we want to sell, right?
Separately, $AMZN will be making $100 B Cap-ex. At some point this massive cap-ex for growth will turn into just sustaining/ maintenance cap-ex, that should result in at least $50 B drop to the bottom line. That’s why I am focusing on FCF, rather than EPS.
Amazon is not just an online store anymore than Tesla is just a car company.It’s no wonder that Bezos and Musk are the world’s richest entrepreneurs. In the early days of Amazon Bezos talked a lot about how Amazon started up. A fantastic story for would be entrepreneurs.
Although two more different stories would be hard to find. Amazon’s growth has been entirely organic, from books to merchandise, to outside vendors to multiple distribution centers to data centers to renting time to logistics and vans, to advertising on the site and so on.
By contrast Musk has a bunch of disparate businesses which have little, sometime nothing to do with each other. Tesla and tunnels, a stretch but conceivably linked. Space X? PayPal? You could make a link from Tesla to AI, I suppose, but to Neuralink? And here comes X around the far corner…
Apple was mostly built on linear developments, even if some were vast jumps (Apple ][ to Mac, for instance), and Amazon similarly. Musk, by contrast, gets bored and starts up crazy stuff to keep himself occupied (politics is just the latest), but I have to give him credit for being mostly successful at it.
We are generally not big Amazon customers - probably under 10 orders a year. Started out the year with 4 smallish orders, though, to get a few things that we wanted for an upcoming vacation but didn’t get for Christmas.
Which reminded me of Thomas Edison who started 14 companies (including General Electric) and had a quite disparate large slate of inventions – electric vote recorder, iron ore separator, latex processing, etc. plus his more famous ones. During WW1 he suggested forming a committee to provide scientific/industrial advice and research to the US military.
I don’t order much on Amazon other than eBooks. Occasionally I’ll buy something from a company that has an Amazon store. For example, bought a chainsaw sharpener sold directly from the Oregon company that was $6 cheaper than if I bought the same thing from Lowe’s. I never by from 3rd parties anymore, plus, like to buy from local mom & pop when I can.
Made me look, it seems I end up about 40-50 purchases a year, little stuff where it’s simpler than running around to find the item, but DW does a bit more, SIL orders multiple sizes to find the right one… I do return stuff, no fits, mostly… Really try to shop local, but late night searches finds the exact cable or tidbit… Pretty amazing the breadth of available stuff…
That came 25 years later, long after the original company was set up, and after Bezos had retreated from Amazon management. Musk, by contrast, reminds me of the guy on Ed Sullivan with the 10 plates spinning in the air, running from one to the next to the next - and he’s still actively involved with all of his companies, or at least so it is made to seem.
Why would I do that? I’m a big fan of businesses which lead to more businesses. That’s not usually predictable ahead of time, but when it happens everybody wins.
(checking my history now).
