Consider these headlines:

Reuters: “Amazon shares set record after strong quarterly profit

Fortune: “Amazon profits take a dive

Than ask yourself: “What is wrong with this pictures?”

 

 
click for larger graphic

Source: Fortune

Category: Digital Media, Earnings, Valuation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

36 Responses to “Comparing Apple vs. Amazon Valuations”

  1. wally says:

    I’d still buy Amazon before Apple; to me it is a company building market share and building a future compared to one that is going the other way. The only question is whether Apple can be smarter with their huge cash horde than the other wealthy US tech firms have managed to be. Typically, those sort of companies have sat on the cash or frittered it on the next big loser.

  2. PeterR says:

    Great graphic. Thanks

  3. tenaciousd says:

    What is Amazon doing with all of those $3.99 shipping charges? All kidding aside, I use Amazon a lot, but I don’t get its future. They can run all the bookstores out of business, but will they ever get pricing power? Let’s say they eliminate their deep discounts on new books or their free shipping on orders over $25.00. That just means I’ll never buy one new and just wait till I can get it used for a few bucks. (I mostly do that now.) Maybe they will be just like Target and make all their money off interest and fees on their credit card. Will they make it off cloud storage fees? Everyone will be renting the cloud. I already have cloud drives from Amazon, Dropbox, Apple, and Microsoft. I never go over my free limit on any of them. Maybe everyone else will. You can never underestimate the desire of the American consumer to take on another monthly fee.

  4. BR,

    you’ve heard, yes?, the old adage..”The Market moves to make the most people Wrong..”

    b4 4Q012, if there was a ‘Triple-Long’-AAPL ETF, it would have out traded AAPL, no?

    seems the ‘curly hair’ is, still, Growing on AMZN..

    don’t worry, yon’ Market’s ‘shears’ are, still, Sharp..

  5. JimChan says:

    @tenaciousd, If you still think AMZN is still a book store, you are missing like another 99% piece of the company. AMZN is quickly eating into some ad revenue (Google), ecommerce (EBay), web services (HP, Oracle), just name a few.

  6. btw, AAPL and AMZN are in different Businesses, no?

    their relative Valuations are informative for which? Reason(s)?

    AAPL-Longs trying to ‘cheer’ themselves up?

  7. smedleyb says:

    Well, everyone knows that Amazon will be the only retailer to exist 20 years from now; and Apple is well on it’s way to becoming the next Sony.

    Or as they say, what everyone knows ain’t worth knowing.

  8. GCV says:

    Apple is a growth stock morphing into a blue chip with a potential for margin contraction and market share decline

    Amazon is still a growth stock with a potential for margin expansion

  9. Jon G says:

    What’s that “efficient markets hypothesis” again?

  10. GeorgeBurnsWasRight says:

    Amazon went public in 1997. After 15 years, I’d expect a “growth stock” to start making a reasonable profit.

    I use Amazon when I want something cheap. Price is my primary loyalty to them, though I will admit their website is adequate. But like many people use Best Buy to decide what to buy then buy elsewhere, I use their website to decide what to buy elsewhere far more often than I buy from them.

    Other than price, my most common reason for using Amazon is they do have a wide selection, so if I’m looking for something obscure I sometimes find it from them. Or more accurately, I often find it from 3rd parties on Amazon’s website. I know they make a percentage on this, but this doesn’t strike me as a business with that wide a moat that they can increase their fees that much before the 3rd parties move to another site to save money.

    The only time I use them preferentially is for gifts when their free shipping over $25 saves me both money and time in line at the post office. But we only have a couple of friends out of town we exchange gifts with.

  11. Concerned Neighbour says:

    Operates in a low margin, hyper-competitive space? Check
    Almost sports a current ratio of less than 1? Check
    Has net tangible book value of $11 per share, yet trades at $265 per share? Check
    For the past twelve months, has lost money? Check

    But hey, it’s still growing, so let’s assume one day it will hit the motherlode! Or so the average AMZN shareholder through time must be saying.

    Even if they miraculously starting earning 5% net tomorrow, the stock would still be trading at a P/E multiple of ~50.

    Look at AMZN carefully people, because the entire market is probably heading there – and in many cases, already is there – thanks to central bank pumping.

    P.S. It’s a great company.

  12. Ramstone says:

    Earnings are so 2012. Profits are going to come in — they have to. Street was stoked about the revenue.

  13. warren.buffett says:

    Are we comparing Apples and Oranges Amazon here?

  14. Moopheus says:

    ““What is wrong with this pictures?””

    I guess it depends on what you mean by “wrong”. If you mean that the market it producing results contrary to your expectations, so what? Doesn’t it do that all the time? There’s nothing rational about it–it’s monsters from the id.

  15. slowkarma says:

    Amazon is probably another fabulous growth stock that I’ll miss. I’ll take that chance.

    It strikes me that Amazon has become an e-bay for non-used goods. But, I’m beginning to see some resistance. Target now says that they’ll meet Amazon prices…

    http://articles.marketwatch.com/2013-01-08/finance/36207518_1_online-prices-customer-service-gregg-steinhafel

    And some stores, like Best Buy, are beginning to express their unhappiness with “show-casing” directly to the customers who they think are doing it.

    The thing that Amazon offers is ease of shopping for expensive items, that you didn’t have to pay sales tax on. One reason we no longer have many camera stores, especially in smaller metro areas, is that nobody wanted to buy a $3,000 Nikon and get stuck with another $210 in sales taxes. But now, sales taxes are coming to Amazon (I live in California, and just got assessed a sales tax on my latest Amazon purchase) and when you put the shipping cost on top of it — especially on items that have to be insured — I think Amazon is going to have a problem. You’ll still have the ease of shopping, but now you may actually have to pay *more* for the product…and without the ability to first try it out.

    You have to remember — we already have had an Amazon (actually, two of them) in American history. They were called Sears-Roebuck and Montgomery-Ward. How did that work out for them?

  16. mad97123 says:

    Do you want to be right or do you want to make money? Fundamental and data are worthless, buy whatever is going up.

  17. Concerned Neighbour says:

    mad97123, do you happen to work for a central bank?

  18. Anonymous Jones says:

    So AMZN is a “growth” company?

    And AMZN is “building market share”?

    How much do profits have to grow to justify this valuation long term? From much less than a $1/share to what…at least $10-$15/share? That sounds ambitious.

    What happens to companies that once were “building market share”? They often lose it.

    Mad97123 is right. If you want to make money in the short term, buy what’s going up.

    But wow, the number of things that have to go right in the next ten years for AMZN to still be worth this price per share are incredibly unlikely to be strung together. Incredibly unlikely. And to be worth more than this? Wow. That would be really impressive.

    AMZN has done a great job building revenues, but I just don’t see as they have much pricing power. And the sales tax arbitrage game is gone, making it even easier for competitors (say, if wal-mart ever gets its act together) to poach back market share.

    This just isn’t a reasonable debate. Something incredibly unlikely could happen and AMZN might be worth this preposterous amount. Heck, somebody who jumps off a building might be saved by landing in a truckload of mattresses that just happened to be driving by.

    But seriously, don’t bet on it.

  19. drocto says:

    I think Tufte would call this “chart junk”.

    This is inane in many ways besides presentation. Most obviously there is the comparison of stock prices, which is entirely meaningless. Market Cap makes sense to compare, but raw share price?

    And there’s the comparison of P/E ratios where one company has EPS near zero. (If EPS were exactly zero you could produce a Chart To Infinity, which would be really cool to look at with a black light in the background and a strobe light pulsing!)

    I see the source is Fortune, so the quality is understandable. But why re-post such nonsense? Oh, I remember, to make money on page hits.

  20. TLH says:

    AAPL and AMZN. Trend following and momentum. Apple will get upgraded after it goes up 100. Amazon will get downgraded after it goes down 100.

  21. JimRino says:

    Apple acting like it expects to be a 10% marketshare company, not a 30%-100% marketshare company.
    Keeps killing successful products, and dropping support for the developer’s who got them there.
    What next, dropping Unix support?
    Servers dropped, desktop’s dropped, 17 in laptop dropped.

    Instead of competing and eating into Microsoft marketshare, they’re withdrawing.
    Still haven’t got price competitive movies.
    Computers becoming less price competitive as well.

    What’s their next big thing?

  22. Mike in Nola says:

    I watched yesterday’s Morning Joe podcast on my new Lumia 710 this morning. The blond lady had a pretty good rant about Apple. She was stuck in an airport with whatever the latest iPhone is and the battery was dead. She had several Apple power cords with her, but none fit the new iPhone. Who designs stuff that way? Maybe Sony. Everyone else is using micro usb cords and standard audio jacks that you can find anywhere cheap.

    Another piece of news that could be significant is that Walmart is going to start selling iPhones. You pay with cash or Walmart credit card. I wonder how that’s going to affect the snob appeal of the Apple brand when you see the unattractive types carrying them.

    BTW, MARK IN HTOWN, decided to go cheap on the phone and wait til the next batch of phones that are going to be announced at MWC drive down the 920′s price. Got a brand new Lumia 710 off ebay for $170 and am running it on T-Mobile prepaid. No indentured servitude to Verizon or anyone else. The phone will work on work on ATT’s network also. So far the coverage is a lot better than Verizon’s, even in the sticks. Go figure. The phone ain’t an iPhone, but it’s a quarter of the price and about 1/3 of a 920′s. And it’s extremely fast, something you wouldn’t see on an inexpensive Android. After my wife got to play with it and use Nokia Drive, I just had to order her one.

    Oh, I got two micro usb car cords off Amazon for $5 each. Work fine. That’s the future: cheap generic stuff instead of $50 custom power cords.

  23. Greg0658 says:

    LOL Mike in_? just to make sure you and others know .. the blond lady is this guys daughter
    http://en.wikipedia.org/wiki/Zbigniew_Brzezinski
    I saw that seg .. I don’t know what else to add

  24. softdev says:

    One thing that is wrong with the picture is that it is missing a chart showing the stock price compared to revenues.

    Amazon is pricing to gain as close to monopoly market share as it can. If/when it gets there it will be able to extract monopoly profits.

    Hard to believe Fortune would not understand the importance of share price compared to top line sales.

  25. victor says:

    BR: your call on AAPL’s stock price drop was prescient. Just wandering: did you short it too?

    AMZN: how long before Brazil sues for stealing the name of their river? No doubt AMZN would be finished, ’cause God is Brazilian, right?

    ~~~

    BR: Our clients are investors, not speculators. (We run an Asset Allocation model, with very few individual names).

    But clients had transferred lots of Apple into us over the past 3 years, which we mostly held long. The reversal from that spike to 705 led me to make the sale decision. We had sold just prior to that announcement.

  26. JimChan, above, @15:06, makes a really good Point, re:AMZN..

    “Does, way, more than “Books”" is a major Understatement.

    as an aside, AMZN makes for an interesting ‘Search Engine’–everyone, from Stock Analysts, to Social Scientists, should ‘give it a try’..

    http://www.amazon.com/s/ref=nb_sb_ss_i_1_5?url=search-alias%3Daps&field-keywords=manti+te%27o&sprefix=Manti%2Caps%2C629
    ~~~

    Mike in H-town,

    with..

    No indentured servitude to Verizon or anyone else.

    Got a brand new Lumia 710 off ebay for $170

    the coverage is a lot better than Verizon’s, even in the sticks.

    And it’s extremely fast, something you wouldn’t see on an inexpensive Android.

    ain’t an iPhone, but it’s a quarter of the price and about 1/3 of a 920′s.

    two micro usb car cords off Amazon for $5 each..
    ~~

    sounds Frugal (Intelligent), not Cheap..~
    ~~
    good example of ‘putting it under hoof’ does way more than URL surfing for ‘the latest *intel’/marketing-driven ‘Review’..
    ~~~
    though, if you’d like some ‘background’ as to Why? T-Mobile works so well in Houston..

    see some of.. http://search.yippy.com/search?query=Aerial+Communication+Houston+GSM&tb=sitesearch-all&v%3Aproject=clusty

    the old AERL laid in some decent Infrastructure, to say nothing of ‘CapGains’..

  27. Mike in Nola says:

    @Greg0658:

    Never guessed that. They sure pronounce it funny :)

  28. jrob says:

    I agree, the missing revenue comparison is misleading, though not as much as you might think. I believe on a YoY basis, Apple’s revenues grew faster than Amazon’s after accounting for the shorter quarter this year. And over the last 5 years, Apple’s revenue growth has been higher, while actually maintaining high profitability. So, Apple has proven ability to produce earnings growth, Amazon has some history of decent earnings at slower revenue growth and plans to eventually increase margins.

    So, that begs the question, why is AMZN valued so richly? My best theory I just pulled out one of my bodily cavities is that it currently has no major competitive threats. On the contrary, it has a substantial number of competitors that are weak and getting weaker. Maybe there is a continuous flow of money leaving those competitors (like Best Buy, B&N, RadioShack, etc), as evidenced by their plummeting share prices, and needing a new home, finding one in AMZN. Which may continue until a viable threat emerges.

    That, and maybe a sustainable future profit margin has been identified, and some mental math applied to determine virtual EPS and an appropriate PE slapped on it to determine the value. Looks like AMZN had around 3-4% profit margin before 2011. So at 4% margin that would give it a PE of ~50. Seems high for a company growing revenues at about 30%/year, even with a steady margin, doesn’t it? So, I assume the expectation is that eventually their profit margin will increase too. Which would make sense, because Best Buy had a similar margin back in 2008. I would assume Amazon’s model should eventually be more efficient and lower cost, so profit margin could feasibly be higher, especially without viable competition to drive it lower.

  29. Mike in Nola says:

    @Mark:

    That stuff about Aerial is news to me. The comparison that really told was when we went down to Brazoria National Wildlife Refuge a couple of weeks ago before I had the Lumia. I was carrying my HTC Touch Pro 2 which is a world phone that can do both Verizon and GSM. I had a T-Mo sim in it and could switch back and forth between the two. Verizon didn’t show any bars, although it was possible to make a call. T-Mo showed three bars and I even had data coverage. I don’t know how fast it was since the HTC would only do Edge on T-Mo’s network.

  30. @Mike:

    speaking of Brazoria NWR, have you ever thought of taking something like..http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3Daps&field-keywords=Lumix+FZ200

    as opposed to ‘traditional’ Binoculars?
    ~~

    Data Coverage, in the middle of an Estuary, ~40 miles outside the outskirts of an MSA, even, if ‘only’ EDGE, has to a mind-blower, still, no?

    http://www.fws.gov/southwest/refuges/texas/texasmidcoast/brazoria.htm
    ~~

    though, is more ‘background’ as to Why? so many ‘Analysts’ Blow..

    too busy snorting Laser Toner/worrying about getting Tassle-/Kiltie- Loafers mucked up..

    maybe, someone will ‘drop them a Hint’..

    http://search.yippy.com/search?query=Sunlight+Vitamin+D+aids+immune+system&tb=sitesearch-all&v%3Aproject=clusty

  31. Mike in Nola says:

    Someone mentioned Amazon as a retailer of things other than books and it is amazing what you can find on there. We couldn’t find CDM Coffee & Chicory in Houston so I’d bring a supply from New Orleans when I visited. The vacuum bags would last a long time. I eventually thought of looking for it on Amazon and they sell it. They have a subscription service where you can have items delivered on a schedule of your choosing. They give you a discount for using the service. We get it cheaper from Amazon than I can buy it in a grocery in New Orleans.

  32. Mike in Nola says:

    @Mark:

    Actually, we bought the Canon version of that camera for or trip to Europe. SX260. Was a great traveling camera. A little heavier than the older, ultra pocketable Canon point and shoot I managed to drop in a Paris museum the year before, fortunately at the end of the trip. But, the zoom gives you a lot more options in composition. The pictures were razor sharp and the focus and IS was great.

    Here is a site I spent a number of hours on before making a decision. Everyone touts the Panasonic, but if you look closely, the Canon is as good.
    http://www.cameralabs.com/buyers_guide/superzoom/best_superzoom_camera.shtml

    Wish I lived where that reviewer does. Looks like something out of Doc Martin.

  33. @Mike,

    def. Canon makes nice Cannons, too..

    was more to the “Zoom Camera v. Binoculars” Q:

    as you’ve seen/experienced “Shoot’em with your Nikon..” is, afterall, merely, an Idiom..~

  34. disfiguredskating says:

    AAPL can buy AMZN for cash it has on its books. Would that make AAPL go up or down? I think you have your answer.

    AMZN is in the business of entering other areas and cutting the profit margins in that area.
    AAPL is in the business of creating new areas and expanding profit margins.

    AMZN CEO said he doesn’t want fat profit margins, so the “AMZN dream” will never be anything other than a dream.

    AMZN has a horrible risk to reward if you are long.

  35. Livermore Shimervore says:

    Very simple:

    Amazon’s stock price is over-valued. A temporary thing. It will fall and smart money will buy.
    Amazon’s structural position in commerece is extremely strong. It’s an internet pillar along with search and social media companies who may come and go but it will take a lot of $$$$ to push aside Amazon.

    Apple’s stock price is under-valued. A temporary thing. It it fall and smart money will buy.
    Apple’s structural position in commerce is extremely strong. It’s a technology pillar with a fan base that do not care if the competition have better hardware or sell it at a lower price. They insist on Apple and frankly would pay even MORE for their Iphones and Ipads if asked to do so.

    See both Apple and Amazon have a fixed customer base. Or should I say a bottom with a nearly unlimited top. Look at Apple sales in China for instance. These loyal customers aren’t going anywhere. If you understand that then you can properly gauge if the price of each stock is too high or too low in any given year.
    Right now Apple has the clear advantage on value. If your strategy is to buy low sell high then what more explaining do you need? The Amazon trade needs a little work but it will work when the time is right.

  36. Livermore Shimervore says:

    p.s. (full disclosure)
    I dislike: Apple products and their deliberat restrictions., Apple commericals, many Apple business practices and their cutting out the U.S. worker despite mind-blowing profits.
    But that shouldn’t cloud my or anyones objective evaluation of the company’s growth nor the value of its share price. Ditto for Amazon.