Is Amazon Spending Its Way to Success?

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July 25 (Bloomberg) -- Maquarie's Ben Schachter and Bloomberg's Jin Erlichman and Bill Maloney discuss Amazon's success with Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Amazon is on a spending spree.

They have built 89 distribution centers with three more on the way.

And they keep expanding their retreat service, amazonfresh.

Take a lot of cash to the internet king.

-- takes a lot of cash to be the internet king.

Is the growth worth the cost?

Let's ask our panel of experts.

Jon erlichman with this story, build maloney with the trade.

What stands out to you in this story?

-- cillbill maloney.

The amazon model, with us, and we will keep spending.

The real goal is to put retailers out of business, a lot of retailers out of business by being the place where you buy all of your stuff and then some.

In the beginning it was all about the physical goods come in there pretty good about getting it to you quickly, but also about the digital content from the movies and tv shows.

We have talked a lot about netflix recently and all that money to build the business around the world and stay ahead of the competition.

Amazon has a similar strategy, but obviously it comes at a cost on profitability.

Margins are razor thin.

That is something we're watching today.

The margins are like 0.7%. it seems like the more they sell, the less they make per unit.

What is your take?

I certainly think they are in an investment base right now.

You have to believe over the long-term margins can increase in order to own the stock.

It is a company that continually gets in businesses that have a much bigger margin profile.

Things like advertising, other software and services that can have a much more meaningful margin than the business today.

Earnings growing somewhere around 350%. is that sustainable?

Think about this over a five- 10-year period.

We think a few years they could make over $10 per share.

It is not an outrageously valued stock.

The opportunity continues to be massive beyond the physical that most people think of when they think about amazon.

Into digital media, advertising.

We think a lot more will come on the harbor front as well, including the possibility of an amazon phone.

That would be interesting.

The stock chart is near an all- time high.

When you look at this, how does it strike you?

The short-term charts are little cautious, but long-term very positive for amazon.

Going back to january 2012, the stock has been an uptrend.

It has clearly defined support and resistance levels through that period.

Recently pulled back at the short-term resistance level and feeding below the 10-day moving average.

A little cautious in here.

The charts are very positive for the stock.

Chart is very positive.

Talk about very positive, so, too, is the p/e ratio.

You are paying a lot of money, something like 250 times earnings for the year.

Do you hold your breath and by this because the growth is so strong?

I think you hold your breath and buy it because you believe in the discount cash flow model being fairly valued.

The issue with amazon has always been about valuation.

People could have said this was a rich the best value stop when it was trading at $20. anyone who did not buy it because of the thought at the time it was too richly valued missed out on a tremendous upside.

Any stories?

They just keep turning out the mayor calls.

Any thoughts?

Well, the ceo is really fascinating guy.

The most important numbers to watch are the sales numbers.

It already told us they could generate 16 billion for the quarter.

The estimate for the third quarter at the high end are around 17 billion.

They clear those numbers come and i think people stay happy about amazon growth story.

If they miss on those numbers, you were worried about growth and the fact that those profit margins are razor-thin.

We will be talking to you on the earnings as soon as the

This text has been automatically generated. It may not be 100% accurate.


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