Shares of Amazon.com closed at a record high on Monday, $268.46. Not bad for a company whose stock debuted at $16 in 1997 — and one that consistently chooses to invest in itself rather than settling for the short-term gains that Wall Street prizes. Not surprisingly, AMZN was trading lower today amid fears of a debt-ceiling disaster, the opening of earnings season and profit taking.
Morgan Stanley upgraded its target for Amazon shares to $325. The Seattle online conglomerate also had a very good holiday season, selling 26.5 million items on its peak day, 306 per second, with the Kindle Fire HD being the most popular item. Christmas Day saw a record sale of digital downloads for 23 million movies, TV shows, songs, magazines, books, audiobooks, and popular apps and games. ComScore reports that overall online spending during the holidays hit $42.3 billion, a 14 percent increase from 2011.
On Seeking Alpha, Shrideep Murthy writes, “Amazon stock returned 38% last year and investors should not be complaining. Of course they are not, because the going is good and the stock hit its all time high yesterday. Questions will arise when the boat hits rough waters…”
He goes on to raise some pertinent questions about the business, not the stock. Among them: Gross profit margins lower than its competitors, the costs of “fulfillment centers,” its opaque use of stock to pay for some operating expenses and whether Amazon Web Services will be a game changer. As for the company’s secrecy: “So much is left to subjective interpretation that investors may want to include a non-transparency risk premium in their valuation models.”
As Jeff Bezos says, “If you’re investing and pioneering, you have to be willing to be misunderstood for long periods of time…” For the sake of Seattle, I hope he’s right.
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Today’s Econ Haiku:
Now that takes some brass