Jeff Bezos is set to become the first person to be worth $100 b as Amazon sets to become a $600 b firm. Unless, of course, Bill Gates goes past sooner.
I simply cannot fathom the mystery behind Amazon's run up on the stock markets; it's crazy.
At $427 b, Bezos is worth $72 b, and an increase of just, yeah in Amazon's and market's terms, it's just, 38% will take Amazon near $600 b and Bezos to $100 b. As such a target price of $1,210 for the stock does not seem far-fetched.
There you go. But then the stock has a business behind it. Is the business really worth that much?
Finally, Amazon has turned profits.
Amazon Web Services is growing faster than Amazon retail (media and merchandise), although, it is still 9% of total revenues.
Nevertheless, AWS contributes over 74% of Amazon's operating profits, and has operating margins of 25%. Whereas, even North American segment, which is profit-making, has operating margins of less than 3%. Excluding AWS, Amazon has far lower operating margins since International segment is not yet profitable.
It is yet to make money on its shipping activities.
Sure, there is a remarkable improvement in generating free cash flows.
Amazon needs to know that acquisitions are a part of reinvestment.
I would also not exclude stock based compensation of $2.975 b from cash flows just because Amazon omitted one part of the process. If it had issued new shares and sold in the market, and then paid out cash to its employees, the activity would be part of cash flows. Why is it any different now? The revised free cash flows to firm then would be $6.615 b.
As of December 2016, Amazon had cash of $26 b, and debt of $20 b excluding its operating lease obligations.
The entire story of Amazon is based on long term and high growth. It earned $4.90 per share in 2016; and is trading at 178.84 times earnings. Almost all of it is attributed to the future; that is the price of growth.
Strictly on the basis of growth and price, I would not be surprised if the stock is priced at $1,200 right away as it implies an earnings multiple of 247 instead of 178. Is that a big deal?
There you go, the market has the potential to make Bezos $100 b and the richest man on earth. I never underestimate market's psyche, like I don't underestimate anyone who overestimates oneself.
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