Apple made more profit in three months than Amazon has generated in its lifetime
cnbc.com
cnbc.com
a) noun 1. a financial gain
and
b) GAAP profits
Amazon has made loads of a) and not much b). Perhaps not coincidentally b) are what you are taxed on.
The financial gains made by shareholders in each over the last 5 years as reflected in increase in market cap are about the same for both - $626bn for apple, $648bn for amzn.
For those not into accounting, roughly how it works is if your basic sales are $10bn, costs $8bn then you can put the $2bn in the bank (apple) or spend and expense it on stuff that will increase market share (amazon).
There are many ways to compare AAPL and AMZN. Another angle: one is trading at 5 times book value and the other at 25 times book value.
No, it's because mainstream retail notoriously has horrific margins. There is no scenario where Amazon's retail business will ever generate meaningful margins such that it could be a profit juggernaut. It is not a tax dodge such that they could be yielding massive profits on retail, there is never going to be much profit in that segment.
Right now the only way Amazon is yielding consequential profit, is courtesy of AWS, which does have good margins and is producing nearly all of Amazon's net income.
The retail business - which makes up most of their business - at a standard 2%-4% net income retail margin on ~$140 billion in retail sales, is worth an optimistic $100 to $120 billion; you could push it to $150 billion if you want to give them a larger growth multiplier.
First quarter AWS operating income: $1.4 billion
First quarter total Amazon operating income: $1.9 billion
All the profit-based value in Amazon is in AWS. Retail will always suck, without exception.
That $500m in operating income on the rest of Amazon's $45 billion in sales, is not very far away from the margin you would expect to see on a mainstream retailer. $1b for that segment would be closer to normal if Amazon's growth were more settled (as in the case of Walmart & Target). In this case, that tiny retail profit is still be plowed back into dramatically higher growth than what Walmart or Target have.
I guess that's true but so is OP's assertion that Amazon has a reputation for reinvesting would-be profits back into the business.
By the way another way to look at Amazon is the retail business provides significant operating leverage to enable AWS to yield substantial profits.
If Apple shut down tomorrow, nothing would really change. If Amazon shut down tomorrow, they’d bring down everybody.
> One Wall Street analyst believes Amazon is still in the "early stages" in many of its key markets.
With as many things as Amazon has its fingers into, it seems to me to have the potential to end up more profitably than Apple.
Cloud computing, autonomous vehicles, drones, ai, smart home tech, developer community, etc. Are all things Amazon has a leg in that Walmart has literally nothing.
Amazon has had an amazing stock run-up in the last 2-3 years, but stock is 6-7X overpriced compared too any of their peers.
Also, Bezos is too smart for his own good, and has no succession plan.
Extrapolate Amazon's retail business out to the size of Walmart, $500 billion. Assume extreme retail margins: 5% net income margins. $25 billion in profit, at max size, under the best case scenario Amazon will ever see. More likely, Amazon will never reach the retail size of Walmart today (inflation adjusted).
A more likely number: maybe $12 to $15 billion in retail profit. Slap an optimistic valuation for the retail sector onto that: $240 to $300 billion valuation. Comparable to Walmart.
Next, AWS at $60 to $80 billion in eventual sales, with 20%-25% margins, spitting off perhaps $15b-$20b in operating income. That business might end up worth $300b to $500b.
All of Amazon's best case scenario growth for the next ten years, is already priced into the stock. That's what you would typically expect with a ~250 PE though.
And not a dime of that was paid to shareholders as dividends. So what does it matter?
I once had a local businessman tell me that profit was a waste. You are such a poor leader that you can't find a way to reinvest that surplus in your company and its people? So you give a quarter of it to government and put the rest in the bank so they can use it to make themselves money?
I'm not a fan of Mr Bezos but I think he has the right idea; if shareholders aren't demanding cash then take the opportunity to feed the net revenue back into the company. Some day the shareholders will wake-up...
Apple pays a dividend and has a massive stock buyback program.
If you’re talking about AMZN then it makes sense as they buy up more verticals, reinvesting any profits to growth.
In either case the two companies are at different phases of their cycle. Apple is in the stable dividend mode while Amazon is still growing. Either could choose to change that, of course, but shareholders have expectations and to some extent both organizations are up to the whims of shareholder voting.
[0] https://www.google.com/amp/s/www.cnbc.com/amp/2017/05/02/app...
Where Amazon is something you use, Apple makes something you identify as part of your personal story. Instagram has a similar play, where it is a platform for democratized celebrity, people "become," Instagram famous. Facebook is more of an individual signalling tool for people who have already won, or who just don't understand the game. To me FBs long game looks like a dystopian malignant Equifax.
Oddly, Reddit has Instagram level upside if only they could hire someone with vision, and build an org that could execute on it instead of handwringing about solving political problems.
Apple is a gatekeeper to aspiration, and the demand characteristics of that are unlimited. The stat in the article does not surprise me at all.