Analysts often argue the value of Amazon stock and question whether it is priced correctly. Amazon stock currently prices at $184.04 (April 11 4:00 p.m.). The online retailer giant has more than doubled its stock price, and its P/E ratio currently exceed that of almost all major internet companies. Profits are growing, sure, but there is very little rational about current price levels.
When it comes to free cash flow, Amazon is priced just fine for a fast-growing market leader. What's that? Amazon is also packing a stratospheric top-line multiple, too? Target, Wal-Mart, and Amazon.com are all getting by on 3% profit margins, yet Amazon's price-to-sales ratio is roughly four times greater. Well, here's where we have to consider digital delivery as the means to chunkier margins. Amazon's Prime membership plan is also a winner; it lets patrons pay $79 a year for free two-day shipping of all Amazon-warehoused goods. If you've met someone on Prime, you know that nearly every online shopping experience they have begins and ends with Amazon.com. The convenience of low prices and free two-day delivery -- or just $3.99 for overnight shipments -- is a huge loyalty-builder. Amazon will continue to gain market share, since the Prime moat can't be copied by a smaller rival without its e-tail trust, experience, and breadth of merchandise.
Is Amazon overvalued? No. Is Amazon undervalued? Sadly, it's not. A pullback shouldn't surprise even the most ardent of bulls. However, given the online retailer's momentum, girth, and future catalysts, it's hard to bail on it. Especially as we head into the holiday season, which Amazon.com has historically owned.
Retail industry was slumping few years ago during the period of economic hardship. However, recently, the report from The Wall Street Journal shows that retail sales come in solid in March. “The majority of retail chains, including Costco Wholesale Corp., Macy's Inc. and Limited Brands Inc., reported decent gains for the month at stores open a year or more. Others, including Target Corp., J.C. Penney Co. and Kohl's Corp., posted declines in same-store sales from a year earlier, but the drops were less than analysts projected. Upper-end shoppers continued to show particular strength, with Saks Inc. and Nordstrom Inc. delivering strong results.”(The Wall Street Journal, April.8). In general terms, the retail industry is growing nowadays.
About the stocks, Costco, CVS, ScanSource, and United continental have been the US's hot stocks. William Blair noted that March was the fifth-straight month of average purchases excluding gasoline and currency fluctuations at Costco Wholesale Corp. (COST, $76.41, -$1.41, -1.81%) rising from a year earlier, "which should make it easier for the company to leverage expenses." But Goldman Sachs lowered its stock-investment rating on Costco to neutral from buy as earnings estimates and current stock valuation "fully reflect its strong franchise value, which continues to gain market share as demonstrated by" March's sales strength and outperformance of retail in general for the period.
However, Karen Talley from the Wall Street Journal, predicted that sales in retail industry look like have little spring. "A later Easter holiday and chilled shopper enthusiasm are expected to produce the first monthly drop in same-store sales since August 2009. The chain-store sales results for March, which come out Thursday, likely will spur questions about April's strength.March also saw earthquakes and a tsunami in Japan, which had a direct impact on some retailers that have operations in the country, while curtailing tourist visits—and buying—by Japanese tourists who would have visited the U.S."
h IPad 2. According to Steven Russolillo’s article “Best Buy Temporarily Restricting Some IPad 2 sales” from WSJ, Best Buy now is enforcing the policy that each consumer can only buy a max at 2 IPad 2. There might be various reasons of this action, the most important one is of course the shortage that are driven by Japan’s earthquake and Apple Fans’ passions.
However, Apple is now throwing out the new products much sooner than before. The rumor of IPad 3 and Iphone 5 sounds so real that Apple is going to issue those two products on June. I bet many people are still spending their time in order to get an IPad 2 by that time. W
e all know how great Apple has done, technological, designing and, most successful side, retailing.
If you think about IPad 2, there are actually not many innovations. Apple could do all those on IPad 1. Same thing happens to Iphone 4. Consumers are so exciting every time when Apple releases a new product because they get some new stuff on it. But, those stuff is not actually anything innovative.You just felt you got something new by ignoring the fact that you were able to get those on the last generation of the products.
This is why Apple is so successful. They are not only doing innovations, they are doing great on marketing as a retailer. All those are smart moves as a company, but from my point of view, those are waste. Apple wastes so many recourses to make more profits, in the other words, they do not really have social responsibility.
The retail market continued to have economic gains in March, which leaves the retail industry with a 1.7% increase over the past year. Analysts were surprised by the results and had predicted a .7% decrease. Not surpassingly, the high-end retailers came out on top for profits. Nordstrom saw a 5.1% increase and Saks had an impressive 11.1% increase. This just goes to show the higher-income households are more eager and comfortable spending money.
80% of retailers beat their profit expectations in March, which is a good sign for the economy (LA times). Limited Brands, owner of Victoria’s Secret and Bath and Body works, saw the greatest overall profit gain of 14%. Costco and teen retailer Zumiez also had increases in profits.
Michael Niemera, the chief economist of the International Council of Shopping Centers, believes that this “This gain, in the face of somewhat adverse factors, was encouraging and reflected a solid underlying trend in consumer demand” (LA Times). This is good news for investors and retail companies alike. Analysts believe that there is definitely more consumer confidence in spending. Expectations for April are that profits will conitnue to increase and hopefully there will be more widespread spending among all the different economic groups.
Most retail firms were hard hit by the economic recession. This is mainly because consumers became extremely cautious about how they were spending their money, and curved their spending habits. For example, Amazon, which was on a upward growth since it started to turn profit in 2003, stunned everyone with a remarkable increase in profits in times of recession.High street shops may have been struggling to make ends meet during the recession, but online retailer Amazon is still going strong. According to NetAdvantage, during the 2008-2009 recession Amazon revenue increased, although it was not such a big profit as Amazon usually had, they didn't experience losses. The American company stunned Wall Street analysts by recording profits of $199m for the last three months - a jump of 68% on the same period last year. Sales, meanwhile, rose by more than a quarter to $5.45bn. Estimates had suggested that the Seattle-based company was due to rake in around $5bn in sales for the period ending on September 30.Amazon was particularly buoyed by the success of its Kindle electronic book reader, which founder Jeff Bezos said was now a mainstay of the Seattle-based company's strategy.
LVMH, is the world’s largest luxury-goods group, for decades LVMH’s formula has worked like a spell: seduced by beautiful status-symbols, perfect shops and clever advertising, millions of people have swooned forgetfully towards the firm’s cash registers. At Louis Vuitton, LVMH’s star company, the model’s pricing power has yielded consistent profit margins of around 40-45%, the highest of any luxury-goods brand. During recessions customers found it far harder to forget about price. The seriously rich, of course, still spent freely. But much of the industry’s rapid growth in the past decade came from middle-class people, often buying on credit or on the back of rising house prices. In the first half of 2009 the group’s revenues were about the same as a year before, though profits were 12% lower. Two divisions—wine and spirits, and watches and jewelry—were the worst affected: their revenues each fell by 17% and their profits by 41% and 73% respectively (see chart 2). The falls were offset by Vuitton, where revenue rose by a double-digit percentage, registering gains in every market. “It is incredible that in a downturn the consumer still buys so many Louis Vuitton bags, but she or he does,” says Melanie Flouquet, luxury-goods analyst at JPMorgan in Paris.
The largest apparel maker in the world by revenue, VF continued to add new retail stores and plans to snap up new brands in order to survive the recession. VF Corp experienced losses in revenue after the 2008-2009 recession. When Mr. Wiseman, formerly the company's chief operating officer, became chief executive of VF in January of 2008, the economy was still sailing on a consumer spending boom. But nine months into his new role, the boom was over. VF's earnings slipped almost 30%, to $115.9 million, in the critical fourth quarter. For the full year, operating income fell for the first time since 2000. They have since bounced back in 2010 due to their strategy, the company went on an acquisition spree, snapping up a dozen new "lifestyle" brands, such as outdoorsy label Napapijri, surfer brand Reef, and women's yoga-inspired active wear brand Lucy. "We know the challenges of the upscale department stores," said Mr. Wiseman. Nevertheless, he defends his strategy, arguing that, for now, VF can capture consumers at lower- and mid-tier retailers, but "when they shift back up to luxury we can catch them there as well." Mr. Wiseman said that the company is keeping a close eye on its balance sheet, which had $382 million in cash at the end of last year, and a $1.3 billion letter of credit. VF has no long-term debt coming due until the fall of 2010.
According to the report from NetAdvantage, analysts tend to believe that the industry as a whole is still be affected by the economic crisis in general. The report also pointed out that although the US economy has officially been in recovery sine June 2009, the consumers’ confidences remain weak because of the high employment rate. However, the report also points out that the high-income class is feeling positive about the future and, it is an important indicator because this would lead consumers out of prior recessions.
The recession affected most companies domestic companies in a negative way. However, there are other raising economies which have been less affected by the recession, so multinational companies have been less affected by the recession.
Among those multinational companies, luxury brands like LVMH Moet Hennessy are having an easier time because of the other economies that are less affected by the financial crisis such as China and Japan.According to the article “LVMH’s Net Income for Year Soars 73%” from New York Times, the net income of LVNH 2010 surged 73 percent to $4.1 billion. The article also states that “demand from the newly affluent, especially in Asia, is driving much of the rebound in the luxury industry after overall sales slumped around 8 percent in 2009.” Which also suggests that luxury brand is a very good investment opportunity.
Among those stats, it is clear that companies’ revenue related to their supply elasticity. Most companies which have inelasticity supplies will do better even during recession.
Amazon, the giant online retail company recently “took the plunge” and made swift entrepreneurial decision to launch Cloud Drive. Cloud drive is an online internet service where one can store music and other digital files and then be able to access them via internet servers, smart phones and other digital devices. Cloud Drive will not only enhance Amazon’s impressive retail business, but also allow consumers to depend on Amazon-only products. Amazon is offering 20 MGB of online storage to anyone who purchases the Amazon MP3 devices.
Companies such as Google and Apple are trying to integrate products similar to Cloud Drive, but because of strict company licensing agreements there has been little headway. Amazon’s creation of sound cloud so quickly is because of it’s business model. Amazon uses a service called EC2, which is an elastic online server that handles all the spikes in traffic. Amazon’s business is successful because it is developing business models that coincide with developing technology. Amazon was the first popular online bookstore, and largest online retail company. The sound cloud serves as another example as to why Amazon will continue to grow financially and establish it’s dominance as an even bigger player in the retail and technology world.
