If you had $2T in cash, and you were to buy all of Amazon's outstanding shares, taking it private, to own it forever, earning your money back from the company's profits year after year, after subtracting all amounts reinvested in the business -- in the same manner you would do it with, say, an apartment building, would you ever recover your $2T investment? What kind of annual return do you think you would you earn over the remaining life of the business?

The only bound is how much money can be borrowed at an interest rate lower than the future expected free cash flow of the business.

The share price should reflect future earnings. If you are a shareholder, you believe that amazon will continue to grow and that other people will continue to value its future earnings higher than the price you purchase at.

Amazon’s strategy is not (solely) to make a profit. It’s strategy is to invest in growth, sometimes in such a way that makes a loss or scant profit, to dominate markets in a way that gives them sustained competitive advantage.

If you bought Amazon and asked them to switch to simply profit making, then they could can a lot of the future growth stuff to get your trillions back. Comparing them to an apartment building which can only grow in line with a wider market (ignoring subdivision of apartments etc) is just a weird false comparison in my eyes.

This does not mean the business will chase profits instead of growth.

I believe he’s paraphrasing value investing as described by Warren Buffett. I’d guess other investors have said the same thing although Buffett is quite well-known.

In particular, the market cap of a company should theoretically be equal to the net present value of all future and current cash flows. Therefore, (again, theoretically), if AMZN is priced correctly, the answer should be that you will break even, eventually.

Seen in this light, the company's job is to ensure that its stock is not priced correctly -- that you should actually be able to make a profit by buying AMZN (even the entire company) today.

As we know that theory is wrong we should discard it, which then opens the question back up. Anyway, expectations of future earnings are far from the only way stocks are valued. If you can predict a short squeeze for example you expect a jump in price independent of fundamentals.

What do you think doing that would say about Amazon’s value? Why does that matter in justifying its price today?

In essence guessing if a stock is likely worth it’s current price is asking if it’s a low variance bet (T-Bills), high variance bet, or miss priced.

Maybe in theory, but in practice, at least currently, that’s not how the market is behaving.

The current stock price reflects the aggregated sentiment of past transactions regarding the probability of the actors being able to turn a profit now vs later. The person who is selling is either acting on the sentiment of cutting losses or realizing a gain, while the one buying is acting on the sentiment of the expectation of future gains.

Earnings might be one factor that informs sentiment, but it is not the only one or even the most important, especially for retail investors using Robinhood for example.

Given how bonkers all investment classes are right now, it’s a pretty sane question to me. Also, tagging a seemingly honest question as silly feels a bit harsh to me.

Edit: looks like the P/E ratio almost doubled in 2021 from 20-25 to 40-45. Is that just because revenues were down during COVID, or is it where all the stimulus spending ended up? https://www.multpl.com/s-p-500-pe-ratio/table/by-year

Interests rates are already low, and it seems like a conscious choice not to raise them because of the potential negative implications.

Everyone seems to be buying assets, whether financial or real, as a result.

But there’s reason to believe Amazon could experience long-term growth in the rest of the world, even if growth in the US reaches equilibrium.

The author is using 2021 GDP numbers to compare to amzn's projected sales in 2027

They are just having R&D 50% bigger than Google.

The ratings thing is a blip for them. Only sophisticated customers are aware of it... and sophisticated customers are the exception, not the rule.

It doesn't take an extraordinary amount of "sophistication" to notice that the products that you ordered are cheap, broken and/or counterfeit trash when they arrive. They don't deliver any more quickly than anyone else anymore either. Unless you're on Prime; I think they prioritize Prime.

My experience with the products I've received ordering from Amazon has generally been very good, comparable to products I bought in person. Things are generally as advertised, and work correctly. My guess is that Amazon is doing well because mostly people have an experience similar to mine, and are happy to keep ordering?

I thought they made a smart move with their own branded stuff but a lot of this is just as bad quality.

There is much more wrong with Amazon, but they survive and thrive simply because of their scale.

I had one order last year where I was unhappy with Amazon’s treatment on the issue. They were willing to give my money back without hassle, but that wouldn’t fix my wife’s car’s charging system, so I had to make something work.