1/ Thread: $AMZN bear case from an $AMZN bull
I am long $AMZN. I have a separate thread in which I detailed why I am bullish.
But every stock has its bear case.
This thread is an attempt to lay out the bear case. Let's begin.
I am long $AMZN. I have a separate thread in which I detailed why I am bullish.
But every stock has its bear case.
This thread is an attempt to lay out the bear case. Let's begin.
2/ Question 1: Does shipping follow diseconomies of scale?
Since Prime members don't incur the "friction" i.e. shipping costs, and everything gets delivered in 1/2 days, there is no need to plan ahead. Just order one thing at a time.
More shipping costs. Less (or no) profit.
Since Prime members don't incur the "friction" i.e. shipping costs, and everything gets delivered in 1/2 days, there is no need to plan ahead. Just order one thing at a time.
More shipping costs. Less (or no) profit.
3/ Sure, $AMZN is investing. So is $JD. And none of their numbers show any sign of scale benefits.
If $AMZN can get it down to 8-9% as % of GMV, the math works.
With increasing penetration of Prime among lower income households, shipping cost can be difficult to come down.
If $AMZN can get it down to 8-9% as % of GMV, the math works.
With increasing penetration of Prime among lower income households, shipping cost can be difficult to come down.
4/ Question 2: Is $AMZN losing its religion i.e. customer obsession?
The decision to introduce ads in the site did not emanate from AMZN's usual customer obsession, but to respond to competition. Feels a bit off.
FWIW, I do find AMZN's ad relevant and helpful.
The decision to introduce ads in the site did not emanate from AMZN's usual customer obsession, but to respond to competition. Feels a bit off.
FWIW, I do find AMZN's ad relevant and helpful.
5/ Question 3: Can $AMZN replicate its success in international markets?
At this point, AMZN's playbook is clear to everyone. If they enter your country, your physical retailers/home grown online retailers will suffer.
As we move to de-globalization phase, wouldn't you think...
At this point, AMZN's playbook is clear to everyone. If they enter your country, your physical retailers/home grown online retailers will suffer.
As we move to de-globalization phase, wouldn't you think...
6/...there will be heightened pressure on regulators/govts in other countries to make the playing field as uneven as possible for $AMZN?
Plus internationally, $BABA, $JD can also provide some decent competition in some markets.
Plus internationally, $BABA, $JD can also provide some decent competition in some markets.
7/ Question 4: If your net worth were $140 Bn, would you care about mundane topics such as e-commerce margins?
Zuck's mission is connecting the whole world. It's an exciting and incredibly complex mission. What is Bezos' mission again?
I cannot help but think if I were Bezos...
Zuck's mission is connecting the whole world. It's an exciting and incredibly complex mission. What is Bezos' mission again?
I cannot help but think if I were Bezos...
8/ ...I would be much more interested in @blueorigin than worrying about shipping costs.
Granted, AWS is more exciting than e-commerce, but still pales in comparison with the potential of space.
Is Bezos even interested anymore?
Granted, AWS is more exciting than e-commerce, but still pales in comparison with the potential of space.
Is Bezos even interested anymore?
9/ Question 5: What if someone does what $AMZN did to $WMT?
WMT was invincible. Nobody imagined a book store from Seattle was going to take on Sam Walton's Walmart.
But boy AMZN did.
What if there is another "bookstore" out there? $AMZN's FCF is pretty much back end loaded...
WMT was invincible. Nobody imagined a book store from Seattle was going to take on Sam Walton's Walmart.
But boy AMZN did.
What if there is another "bookstore" out there? $AMZN's FCF is pretty much back end loaded...
10/ ...so if $AMZN faces a potent competition 5 years from now after two decades of crazy capex with barely any profit (from retail) to show for, that won't go well with Mr. Market.
11/ Question: What if $AMZN is broken up?
I actually don't lose sleep over this. First of all, breaking up the big tech is NOT my base case. It's just too difficult to do.
Still, I believe $AMZN is best positioned to weather such a scenario. $FB probably would be hurt the most.
I actually don't lose sleep over this. First of all, breaking up the big tech is NOT my base case. It's just too difficult to do.
Still, I believe $AMZN is best positioned to weather such a scenario. $FB probably would be hurt the most.
12/ Retail and AWS are different businesses.
If the court rules against big tech, $AMZN can spin off AWS, allow politicians to declare victory which can force other big techs to break up as well that can lead to $AMZN being net beneficiary (relatively) from the whole exercise.
If the court rules against big tech, $AMZN can spin off AWS, allow politicians to declare victory which can force other big techs to break up as well that can lead to $AMZN being net beneficiary (relatively) from the whole exercise.
13/ Finally, remember the back-end loaded FCF I talked about?
If you are $AMZN bull as I am, we are forced to estimate FCF numbers 10 years from now that may seem pie in the sky looking at current FCF.
Imagining the world 10 years from now is difficult. How difficult? See this.
If you are $AMZN bull as I am, we are forced to estimate FCF numbers 10 years from now that may seem pie in the sky looking at current FCF.
Imagining the world 10 years from now is difficult. How difficult? See this.
End/ As @wolfejosh says, "Failure comes from a failure to imagine failure".
This thread is an attempt to imagine why my $AMZN bull thesis might fail.
If curious, here's my bull thesis.
This thread is an attempt to imagine why my $AMZN bull thesis might fail.
If curious, here's my bull thesis.
