Don't Say the "M" Word!
5 Reasons To Avoid Amazon Stock! And Why You Had Better Pay Close Attention!
Whoever enters here honors me; whoever doesn’t- pleases me.
-Friedrich Nietzsche
Live Yet Pre-recorded- Episode CIII of:
Don’t Say the “M” Word!
A Silent Radio Hour: Live Yet Pre-Recorded:
“I understand people believe I'm just a statistic
I say to them I'm different”
10th grader, Antwon Rose
“De l’audace, encore de l’audace, toujours de l’audace!” [“Audacity, audacity, always audacity!”]
-Georges Danton
“The power of the powerless!”
-Vaclav Havel
NSPB: Welcome “our” most cherished listeners! And welcome back to TheSASMO!
TheSASMO: Thank you Becka!
NSPB: And how was the vacation?
TheSASMO: Wonderful! To be honest! If I didn’t get away from the freakin’ Amazon! Well! I believe I would have imploded! Or else! In the words of an American political commentator, comedian, and host of The Stephanie Miller Show, a liberal talk radio program produced in Los Angeles, California; progressive radio talk-show hostess: Stephanie Miller! ‘I think I’m gonna barf!’
RAT: May I quote you on that SASMO?
TheSASMO: No Warren! You may not!
RAT: Damn!
NSPB: Okay than! We’re moving in the right direction!
J: Straight into the bowels of Hell!
RAT: Or what’s known as the Amazon.com Fulfillment Centers or FCs!
NSPB: Okie Dokie! Seems we’ve already lost control! Let’s try this one more time!
D: What?
RAT: Quiet Drew! TheBecka’s making one of her many pronouncements! A little speech if you will: Becka!
NSPB: I pronounce that (1) Warrant had better shut the hell up! (2) That Jonathan and Drew who’ll never measure up, no matter how many times they hold their breaths in protest, to become the Property Brothers! And (3) Onto 5 Reasons To Avoid Amazon Stock! And Why You Had Better Pay Close Attention! TheSASMO, please!
TheSASMO: Let’s begin with a statement! Amazon has higher Price/Sales multiples than established tech companies such as Apple, IBM, Cisco, Intel, and Qualcomm! Now! Despite a fraction of the operating margins, including assets acquired with capital leases, Amazon hasn’t produced any free cash flow since the beginning of 2017!
“Real” living human beings: Wait-a-go Amazon!
J&D: Idiots!
RAT: Stupid Ass Scratching Idiots or SASIs you mean!
J&D: Right!
TheSASMO: Obviously! Amazon has also come under increasing scrutiny related to poor working conditions and low wages for a large percentage of its employees!
D: Doesn’t TheAmazon know that the word’s out about their system of mass devastation? The obliteration of everything that working people hold dear?
TheSASMO: They don’t care!
D: Why SASMO?
TheSASMO: They think everybody but themselves is stupid! The buying public, working people included!
J&D&RAT: Ass Scratchingly Stupid or ASS!
“Real” living human beings: ASS! ASS! ASS! TheAmazon always smells of ASS!
TheSASMO: I’m telling you all! This company’s headed for a disaster of biblical proportions!
NSPB: What do you mean, “biblical”?
Rat: What he means is Old Testament New Show Producer Becka or NSPB! Real wrath-of-God type stuff!
TheSASMO: Exactly!
RAT: Fire and brimstone coming down from the skies. Rivers and seas boiling!
J: Forty years of darkness! Earthquakes! Volcanoes!
D: The dead rising from the grave!
TheSASMO: Human sacrifice! Dogs and cats living together! Mass
Hysteria!
NSPB: I think we get the picture! Moving forward! TheSASMO, please!
J&D&RAT: And who yah gonna call?
NSPB: TheSASMO, please!
TheSASMO: Amazon.com’s amongst my least favorite stocks on the market! I wouldn’t buy their shit stock, real stinky by the way, because it’s not trading anywhere close to a price any sane person should be buying it!
J: You hate TheAmazon SASMO! You wouldn’t take it if they were giving it away!
TheSASMO: Irrelevant! Now pay attention! Despite impressive revenue growth, TheAmazon still produces lackluster profit margins and virtually no real free cash flow when factoring in capital leases! Which Amazon.com doesn’t do!
“Real” living human beings: Bad form Jeff Bezos!
NSPB: Thank TheBezos children!
“Real” living human beings: Thank you Jeff Bezos!
TheSASMO: And my main issue will always remain?
“Real” living human beings: What? What remains?
TheSASMO: The valuation! And it’s this which makes little sense from a fundamental perspective! And while TheAmazon has seen operational improvements thus far during 2018, a Price/Sales multiple of 4.7x’s difficult to support!
J&D&RAT&NSPB&“Real” living human beings: What TheSASMO?
TheSASMO: This cockamamie, nonsensical valuation has been the driving force in Amazon’s stock price increase over the last couple of years! It will not! And cannot! Be maintained! I’d much rather see a stock price increase that can be rationalized by performance and less so on increasing valuation multiples!
J&RAT: Meaning SASMO?
TheSASMO: TheAmazon’s nothing but a Paper-Tiger or PT!
RAT: PT Barnum more like it!
TheSASMO: And we’re all just waiting for the clowns to come running out of the preverbal tiny clown-car!
1. Amazon’s Valuation Doesn’t Make Sense:
TheSASMO: If I’ve said it once! I’ve said it over and over again! TheAmazon’s valuation’s over the top! TheAmazon’s increasing Price/Sales multiple is what I struggle with the most.
“Real” living human beings: TheSASMO and his struggle!
J&RAT: Righteous!
TheSASMO: Barely! Look! TheAmazon’s 5-year Price/Sales average is 2.8x according to Reuters. This average would be even lower if you looked at a longer time span. Now the multiple is 4.7x, which is irrational in my opinion! There is no other e-commerce or retail company that comes close to this. Walmart’s Price/Sales multiple is currently 0.55x, more than 8x less than Amazon’s, a particularly shocking figure!
“Real” living human beings: Why TheSASMO?
TheSASMO: Amazon has a higher Price/Sales multiple than Apple, IBM, Cisco, Intel, and Qualcomm. This’ crazy! And considering these companies have some of the highest operating profit margins on the entire planet! For example! Cisco’s operating margin was approximately 25% during its last fiscal year. So far, during 2018, Amazon’s operating margin has been 4%! And they just keep getting away with it!
“Real” living human beings: Bad form Jeff Bezos!
NSPB: Thank TheBezos children!
“Real” living human beings: Thank you Jeff Bezos!
J: Bad Bezos! Bad dog! Bad dog!
TheSASMO: I also struggle when looking at Amazon’s free cash flow production relative to other large-cap technology companies! For example!
“Real” living human beings: Example! Give us your example TheSASMO!
TheSASMO: Amazon and Apple are valued similarly in terms of enterprise value! Yet, God dammit! Apple produced $58.6 billion in free cash flow over the last 12 months and Amazon only produced $8.8 billion according to Ycharts!
D: What is “Ycharts” SASMO?
TheSASMO: It’s a modern data research platform! The platform offers tools such as data screening! Charting! And Excel Add In!
J&RAT: Right!
D: What?
TheSASMO: Simply put! TheAmazon’s growing much faster and this’ caused a huge gap to close and will take many years to catch up if ever? And the question I always pose to any investor’s this! Would you buy a stock based on performance that won’t be achieved for at least another 5 years or more? Or if ever? That’s basically Amazon in a nutshell if things go great! But they usually don’t which makes TheAmazon extremely risky!
J: Lots of bugs and dangerous!
2. Property And Equipment Acquired Under Capital Leases:
TheSASMO: Continuing with the free cash flow theme! I contest that TheAmazon’s reported figures are a little bit misleading! Hell! If not outright lies!
“Real” living human beings: Liar! Liar! Liar! TheBezos’ pants on fire!
TheSASMO: The problem? TheAmazon’s making about 50% of its property and equipment investments through capital lease obligations and we all know they’re not included in ‘capital expenditures’ according to GAAP which basically inflates the company’s free cash flow!
“Real” living human beings: Liar! Liar! Liar! TheBezos’ pants on fire!
D: What’s GAAP SASMO?
TheSASMO: Generally Accepted Accounting Principles or GAAP!
J: We don’t need no stinkin’ Generally Accepted Accounting Principles or GAAP!
TheSASMO: GAAP refers to a common set of accounting principles, standards and procedures, which companies must follow when they compile their financial statements!
J: We don’t need no stinkin’ common set of accounting principles, standards and procedures, that companies must follow when they compile their financial statements!
TheSASMO: GAAP is a combination of authoritative standards, set by policy boards, and the commonly accepted ways of recording and reporting accounting information! GAAP improves the clarity of the communication of financial information!
“Real” living human beings: Liar! Liar! Liar! TheBezos’ pants on fire!
J&RAT: Hell fire you mean!
TheSASMO: The bottom line’s this! In 2017, TheAmazon didn’t produce enough operating cash flow to support its capital investments if it had to pay for everything with cash!
J&D&RAT: Holy Cow TheSASMO!
TheSASMO: Over the last 12 months! TheAmazon’s barely been positive! Hardly a pulse! Again, for a Company that will have more than $200 billion in sales at the end of 2018 and an enterprise value of $1 trillion, this isn’t impressive!
J: Impressive! Most impressive! Obi-Wan! I mean! Thomas “Wight” has taught you well TheSASMO! You have controlled your fear! Now, release your anger! Only your hatred can destroy TheAmazon!
D: Use TheForce TheSASMO!
“Real” living human beings: TheForce! TheForce! TheForce! Use TheForce TheSASMO!
3. Amazon's Core Business Isn't That Great
TheSASMO: Amazon’s core business remains e-commerce and various e-commerce-related services. However, as you must realize by now! TheAmazon makes negligible operating profit on this core business! Its freakin’ ‘Bread & Butter or B&B! It’s actually been Amazon Web Services or AWS that’s driven the majority of operating profits over the last couple of years! Wake-up Assholes! In 2017, AWS was responsible for all TheAmazon’s profit despite only making 10% of overall sales! God damn pathetic! What a wretched, truly dismal if not feeble use of “what got yah here!”
4. Amazon’s Increasing Leverage:
TheSASMO: NOW HEAR THIS! TheAmazon has $45.8 billion in debt! That’s freakin $45.8 billion in debt! That is, as of its most recent quarterly earnings report!
J&D&RAT: YAHOOOOOOOOOOOOOOOOOOOOOOOOO!
TheSASMO: God damned right! This isn’t much relative to the company's enterprise value. However! I don’t like the trends and think Amazon’s enterprise value is considerably inflated!
J&D&RAT: YAHOOOOOOOOOOOOOOOOOOOOOOOOO!
TheSASMO: Amazon’s net cash position has deteriorated since 2015 and would be even worse when considering capital leases! This’ just something to watch in future and could become an issue if Amazon continues increasing debt and doesn’t produce meaningful free cash flow!
J&D&RAT: YAHOOOOOOOOOOOOOOOOOOOOOOOOO!
5. Regulatory And Labor Uncertainty:
TheSASMO: And now let’s throw in the Fear Factor or FF!
J&RAT: Or Fully F$$ked!
TheSASMO: Here’s the common theme throughout! TheAmazon’s thin margins and difficulty producing meaningful profits! Always the same! And when you consider this has occurred despite current advantages, the low employee wages and full access to consumer data, you must ask yourself: ‘What the freak’s goin’ on?
J: And everybody sing!
J&D&NSPB&RAT&TheSASMO&“Real” living human beings: Mother, mother There’s too many of you crying [TheAmazon!] Brother, brother, brother [TheAmazon!] There’s far too many of you dying [TheAmazon!] You know we’ve got to find a way To bring some lovin’ here today, yeah [TheAmazon!] Father, father We don’t need to escalate [TheAmazon!] You see, war is not the answer [TheAmazon!] For only love can conquer hate [TheAmazon!] You know we’ve got to find a way [TheAmazon!] To bring some lovin’ here today [TheAmazon!] Picket lines and picket signs [TheAmazon!] Don’t punish me with brutality [TheAmazon!]Talk to me [TheAmazon!] So you can see [TheAmazon!] Oh, what’s going on What’s going [TheAmazon!] What’s going on [TheAmazon!] What’s going on Right on [TheAmazon!], baby Right on Right on Mother, mother Everybody thinks we’re wrong [TheAmazon!] Oh, but who are they to judge us [TheAmazon!] Simply because our hair is long [TheAmazon!] Oh, you know we’ve got to find a way [TheAmazon!] To bring some understanding here today [TheAmazon!] Picket lines and picket signs Don’t punish me with brutality [TheAmazon!] Come on talk to me [TheAmazon!] So you can see [TheAmazon!] What’s going on [TheAmazon!] What’s going on [TheAmazon!] Tell me what’s going on[TheAmazon!] I’ll tell you ya, what’s going on [TheAmazon!] Right on, baby Right on, baby Right on, baby!
D: The late, great Marvin Gaye!
NSPB: Getting near the end! Oh balls!
J: Sing with gusto! Everybody!
J&D&NSPB&RAT&TheSASMO&“Real” living human beings: ‘This is the end Beautiful friend This is the end My only friend The end Of our elaborate plans, the end Of everything that stands, the end No safety or surprise, the end I’ll never look into your eyes again Can you picture what will be? So limitless and free Desperately in need Of some stranger's hand In a desperate land Lost in a roman wilderness of pain And all of the children are insane All the children are insane Waiting for the summer rain, yeah There’s danger on the edge of town Ride the King’s Highway, baby Weird scenes inside the gold mine Ride the highway west, baby Ride the snake, ride the snake To the lake, the ancient lake, baby The snake, he’s long seven miles Ride the snake He's old and his skin is cold The west is the best The west is the best Get here and we’ll do the rest The blue bus is calling us The blue bus is calling us Driver, where you taking us? Come on baby, take a chance with us Come on baby, take a chance with us Come on baby, take a chance with us And meet me at the back of the blue bus Of the blue bus, on the blue bus, on the blue bus Come on yeah This is the end Beautiful friend This is the end My only friend, the end It hurts to set you free But you'll never follow me The end of laughter and soft lies The end of nights we tried to die This is the end!’
RAT: Sounds and smells like TheAmazon to me!
J&D: Been there!
TheSASMO: Done that!
“Real” living human beings: Dido!
TheSASMO: Any one of these issues I’ll mention below could materialize and have a negative impact on margins! Labor Law Crackdowns! Bernie Sanders has been the latest politician to publicly attack Amazon! It’s easy to understand why given the median Amazon employee makes a little more than $28,000 per year! Sander’s point is that large companies shouldn’t have thousands of employees who are on government subsidies! Unfair business practice! This basically means that American taxpayers help make TheAmazon more profitable! And that’ll end soon enough!
D: Will working people wake-up SASMO?
J: Can they wake-up SASMO?
TheSASMO: YES! Amazon’s Employees Unionize! There’s a long history of questionable working conditions within Amazon’s warehouses and Fulfillment Centers or FCs! And while TheAmazon has successfully squashed all attempts at its employees UNIONIZING, the risk remains important! It can and will happen! Rising wages could become a major issue for a company that already has difficulties controlling operating expenses! Tumbling dice!
NSPB: Don’t even think about it Jonathan! TheSASMO! Finish please!
TheSASMO: Continued Trade Wars! America’s trade wars continue to result in new tariffs and there’s no end in sight! All retailers, even TheAmazon, will face the same tariffs! And it’ll be extremely hard for TheAmazon to find its usual price advantages!
J&D: WOW!
TheSASMO: No fellows! That’s Woe as in W for TheAmazon! Consumer Privacy Laws where Amazon capitalizes on the data it collects on consumers just like Google and Facebook. It’s currently unclear how strict future legislation might be that protects consumer data and how companies are permitted to use such data! This could lead to increasing marketing and customer engagement costs!
J&D: WOW!
TheSASMO: No fellows! Woe as in W for TheAmazon! And Amazon will continue to dazzle investors with impressive sales growth figures but this only masks some of the less desirable aspects of the business! This includes capital-intensive operations with low margins that have so far resulted in lackluster profits and cash flow! And what do I recommend?
“Real” living human beings: Tell us! Tell us! Tell us! Tell us TheSASMO!
TheSASMO: Avoid Amazon’s stock as if the plague! Watch as the increasing valuation, that’s hard to make sense of from a fundamental perspective, causes Amazon’s stock price to tumble!
NSPB: Don’t do it you, Jonathan!
TheSASMO: And even if! If, I tell you! Even if strong sales growth continues over the next 5 plus years with improving margins, which’s certainly feasible, I would never recommend buying stocks based on performance that far in the future! And with a time period that far out, the risk increases given the possibility for changing consumer preferences! The likelihood of a recession! And most certainly! An increasingly competitive environment! Everyone else’s catching up!
J: And that’s good night Amazon! Sorry! Sorry! I meant: Good night Irene!
D: Bye everybody!
NSPB: And that’s the end of our scheduled program! Don’t do it Jonathan!
* * *
To our cherished listeners out there hopefully believing that “our” ‘A Live Silent Radio Hour’ which’s live yet pre-recorded formerly at The Spank the Monkey Café in the heart of downtown Seattle, Washington of the United States of Here’s Still Hoping for the Fifth Aeon to Finally Come and Save Us All Here or USHSHFAFCSUAH in: America which’s quickly Slipping Into Darkness or SID! Hopefully, we’ll be back next time! Who knows? Now listen! I’m Becka formerly known as Reject # 2 now known as the New Show Producer Becka or NSPB! I’m here in what’s known as “Reject Square” where we’re now broadcasting live yet pre-recorded and so many thanks once again to “our” cherished listeners who are anticipating another Episode or E of ‘A Live Silent Radio Hour’! We’re so sorry that you have to live through these nasty “happenings” taking place daily here in America! I mean to say! Really SORRY! But I wish to thank all of you for tuning in once more while again leaving Any Semblance of Rational Thought or ASRT at the door as for the sake of TheBezos: How in the hell can you listen to silent radio? Never understood that one but hey folks! We’re back! (Inspirational Pause!) And please cherished “LISTENERS” again return next time to hopefully Find-Out-the-Facts or FOFs concerning the nature and cause of our Collective Delusion or CD as we Tell Our Tale or TOT of Misery or M here in a land known as America! Please stay safe and always watch out for those Frenzied, Extremely Agitated Regrettables or FEAR who see their own reflection in the Mirrored Sunglasses or MSs of those who would Un-Naturally or UN ridicule our Blessed Way of Life here on Silent Radio or SR! And please! Make sure to thank TheBezos! And so I’m pretty certain! And Good Night Irene! Whoever “she” is?
* * *
D: Jonathan?
J: Yes Drew?
D: Do you think TheAmazon could really topple like TheSASMO believes?
J: Anything’s possible!
D: But is that possible?
J: Better bet your ASS! TheAmazon’s goin’ down!
D: And that’d mean? Go for it Jonathan!
J: ‘She’s not a girl who misses much Do do do do do do, oh yeah She’s well acquainted with the touch of the velvet hand Like a lizard on a window pane The man in the crowd with the multicolored mirrors On his hobnail boots Lying with his eyes while his hands are busy Working overtime A soap impression of his wife which he ate And donated to the National Trust I need a fix ‘cause I’m going down Down to the bits that I left uptown I need a fix cause I’m going down Mother Superior jumped the gun Mother Superior jumped the gun Mother Superior jumped the gun Mother Superior jumped the gun Mother Superior jumped the gun Mother Superior jumped the gun Happiness is a warm gun Bang Bang Shoot Shoot Happiness is a warm gun, momma Bang Bang Shoot Shoot When I hold you in my arms Oooooooooh, oh yeah! And when I feel my finger on your trigger Oooooooooh, oh yeah! I know nobody can do me no harm Oooooooooh, oh yeah! Because Happiness is a warm gun, momma Bang Bang Shoot Shoot Happiness is a warm gun Bang Bang Shoot Shoot Yes it is, gun! Happiness yes, it’s a gun! Happiness Bang Bang Shoot Shoot But don’t you know that happiness Happiness is a warm gun mama is a warm gun, yeeeaahhh!’
D: Do you think Becka heard that?
J: Who cares!
NSPB: I heard that Jonathan!
J&D: Sorry!