Truly a bizarro world.  More so considering that stock valuations are now decidedly high in a slowing global economic environment.  Amazon continues to baffle, incredibly high valuation and a revenue growth rate that is now slowing down, I think I read 15% this quarter, it was a YoY growth rate right?  If so, it is well beyond my comprehension why it is at a valuation expecting perfection.

 

Procter and Gamble is another company that while great, and one that commands vast and top shelf space at supermarkets, misses on top line (just like most every company out there, with few exceptions), yet it only barely budged on the miss.  PG has had revenue (and profit?) declines for 5 straight quarters, its revenue has been stagnant for three straight years and this fourth year is likely another year of declines.  It is trading at a forward PE of 19, in normal times it would be hard to justify a multiple of 12, and only because it pays a dividend and is a stable company.

 

One of these days the market will surprise this complacent world.

Everyone loves AMZN again, PT raised, upgrades gallore, what could ever go wrong?

It's surreal. The narrative (excuse) for even higher Nasdaq highs today is the "strong earnings" yesterday. From who? Not AMZN, not GOOG, not FB. AMZN gives out a little transparency, the kind of thing taken for granted at every other company except TTWO, and overnight Bezos is $4 BILLION richer despite an earnings decline and earnings loss, and Wall St is throwing him a ticker tape parade.

The skeptic in me says: Big money is looking to transfer the risk to those who buy the story, then at some point in time they bail and bag holders are instantly created.  I know I have been wrong on the following but I am betting this year (2nd and third quarter) we do see the infamous and elusive 15% to 20% correction.

OT - AMZN and the Correction

Once the laws of physics have been 'reversed' (Kirk: "Mr. Spock, what if ....." (we go around the sun counter-clockwise at warp speed and thus reverse time, could we end up back in our own era?), I'm not sure that normal physical (market) 'laws' can be reactivated. Perhaps Jesus will come back before the correction? So far, so good - for Bezos.

OT - AMZN - The secret of AMZN's success? Before my time, there was a popular book called "Think and Grow Rich". Perhaps Bezo's secret is that he read it? Perfected it? Seems to work.

I have talked about the following in the past, but I think it is worth repeating it with adjustments for an even more inflated price:

 

AMZN is trading as if it was generating 7% profit margins.  If we apply this to next years $120B in projected revenue, it would generate about $8.4B in profits for  $18.10 EPS, giving it a still high multiple of 24.58 at todays PPS, but I far more reasonable than its current PE north of 180. 

 

A profit margin of 7% is higher than Macy's (5.4%), WMT (3.37%), TGT (-2.2%).  It is a bit lower than GPS (7.68%), HD (7.63%).  Since AMZN is a retailer that carries a wide variety of products in many retail segments, I would venture a guess that AMZN will eventually end up with profit margins that resembles the average of all of them plus a 1% to 1.5% due to its supposed reduced cost structure, probably not north of 6% profit margins.

 

All of this has a problem of course since AMZN appears to not be in a hurry to stop the high level of capital expenditures that keep it from making any money.  If it did, Investors would be able to set proper valuation metrics for the business and the "story" would probably end and reality would likely pull that PPS down.