Amazon.com (NASDAQ: AMZN) reported its third-quarter results yesterday and they were excellent. The stock is down $15 today so far to $85 as Amazon did not hit the "whisper number" that was circulating about the Street. Analysts were at $0.18 EPS, Amazon reported $0.19, but the "whisper" was at $0.21-$0.22. So, what do we do now? Simple, kill the name!! Then go back and buy Amazon and make it a core holding.
Amazon is a unique and interesting story, not to mention a category killer. No one can touch Amazon, and the proof has been shown with the shares tripling from $32 to $101 over the past 52 weeks. The so-called value guys who do not understand growth investing will pooh-pooh Amazon and give you the old "I told you so," as the shares are down $15 today from the $101 high. Value guys, take your victory lap, then get out of the way so you don't get run over. Oh, by the way, these are the guys that have been negative on Apple (NASDAQ: AAPL) since it was at $50 (now at $185) and Google (NASDAQ: GOOG) at $150 (now at $665).
Amazon, Apple and Google should be core portfolio holdings for any individual investor -- heck, it's a core holding in most growth mutual funds. So what do they know that the naysayers and purveyors of doom and gloom don't know? It's called dominance -- category killer. Try and replicate any one of these three companies ... Impossible, OK, almost impossible!!
Category killers have massive and growing market shares in their respective niches. Amazon has built up an infrastructure that cannot be touched. Amazon has a customer list growing like a weed that is worth its weight in gold. I have two books on Amazon and I can tell you, they service authors and customers superbly. Amazon has the industry covered like no one else can. Game, set and match.
Apple is THE consumer electronic giant and it's a global dominance story. iPod, iPhone, Mac and many other Apple products own their respective space. With category killer status comes margins: the ultimate barometer. Many value guys just don't get that fact -- he who owns the market share arena, controls the pricing and therefore the rich margins. Apple's visibility for the next four quarters is absolutely salivating ... once again, surprise, surprise, forward numbers will go up again, as they have after the last seven quarterly reports!!
Google's world is so large that it's almost immeasurable. How do you quantify the search engine game? The advertising/marketing game? Very tough, but we do know Google owns it and sets the pricing. Google may be the most relevant company of this generation. I have said it before, like since the IPO, and have been laughed at and accused of Kool-Aid drinking. My response is, it tastes great!!
So Amazon is down $15 from its tripled price. Buy it folks, put it away and let the asset grow. Sure the three names all reported superb numbers, but more importantly, they reported great prospects going forward. This has been the case every quarter for the past couple of years.
Value guys, get used to it. The PE's of these three will not be cheap; if they were I would not want to own them anyways.
Georges Yared is the CIO of Yared Investment Research and the author of Baby Boomer Investing...Where do we go from here?
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Reader Comments (Page 1 of 1)
10-24-2007 @ 4:37PM
Dan said...
Very insightful post. Thanks!
10-24-2007 @ 4:59PM
BILL said...
It is very difficult to take an opposing view to that of Georges Yared. I am not taking one now. He analyzed Amazon. I did not. I never ever had a problem with buying anything from Amazon.Their team is superb,well trained and responsive. That is my only measurement.
However, after Cramer starting throwing chairs around on his set last night and dug a deep grave for Amazon, I fear that SOME people will believe his hype.This could hurt the upward movement at least temporarily. I may move in Amazon's direction but not immediately. Not until the dust settles and more furniture remains quiet on Cramer's noisy TV show.
Bill
10-24-2007 @ 5:34PM
Sheldon L said...
Food for thought.
1) Amazon is much more expensive than Apple or Google.
2) Amazon does not have their cash, it still has a lot of debt.
3) Amazon while being more expensive has a slower growth rate.
4) Amazon has many great attributes but a stock is not worth "just any old price" and they are not making the hand over fist profits of AAPL or GOOG.
5) You can buy mechandise on the web from a thousand sources, even if AMZN is the best over all. The same is not true for GOOG or AAPL.
Georges has a remarkable track record - and he IS the growth stock guy - but, AMZN is not in the same league as AAPL or GOOG.
10-24-2007 @ 6:44PM
Isaac said...
Thanks for posting a positive article about AMZN. I was one of their first customers and bought shares on the day of the IPO. I've been listening to "doom and gloom" about Amazon since back in those days. I remember one anaylist saying, "Amazon would have to sell every book in the world to justify it's valuation." I thought, boy, she just doesn't get it. A lot of people still don't get it. Amazon still has HUGE growth potential. Yea, it might now happen. I guess that's why they call it "risk". Many of us are willing to take the chance...
10-24-2007 @ 10:31PM
AUGUST said...
Georges,
As usual, you've gone and made sense instead of spewing maniacal jibberish... while the JC monkey gets all the money for his sideshow. Why all investors don't value true research and analysis over creepy behavioral antics I'll never understand, but I am very glad you're out there riding fence for those of us who do.
Appreciatively,
AUGUST
10-26-2007 @ 2:36PM
Martino said...
so much is being undervalued re Amzn; the cloud, the mp3, the talent of Bezos, AWS,. upon deeper digging the veins of growth are everywhere. Those fellas are in it for the long haul and so am I. Crammer, was forced to throw Amzn out and he dulfully co-operated. By forced, I mean the after house drop, was initiated prior to his delivery and he cheapishly jumped on board for the glory.