Opinions
David Baskin
Amazon.com, Inc.
AMZN-Q
WATCH
Jun 12, 2018
Stock price when the opinion was issued
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Growth will be in the cloud computing division and advertising. E-commerce is under-penetrated in overall society, still under 20%. He views this as a logistics business, and it's the best. Prime is awesome, and they've won that game.
Over time, will eke out more profitability. One of his favourite Mag 7 stocks.
At the time it was cheap on PEG basis, AI play with AWS, growing into all its capital expenditures, economy was looking good. Then tariffs. Now there are headwinds, and it put out softer guidance. Still sees 19% growth, trades at 23x PE. PEG is really not bad for one of the world's best companies. Can probably get it ~$190. Still a winner, more to go.
They have their eye on it and you could buy with a very long term time horizon. However he would wait for a pullback. It has several different businesses, some with very high margins and some with low margins. It is more in the fulfillment business than product selling business by charging a fee for sellers. It shouldn't be hit by tariffs but sellers might. It is not cheap but has an excellent management team along with growth and innovation.
Trades at 34x forward PE, with 20% growth rate starting next year. Technicals are positive. Shares are above 200-day MA, which is trending higher. AWS growth is reaccelerating again. Automation is improving margins. Ads are high margin and boosting profitability. Prime membership is its ecosystem, and very powerful.
Cloud business is the growth driver, sort of subsidizing the retail operations. Retail margins are much lower, only mid-high single digits. Using automation to try to decrease cost of delivery. Prime memberships provide nice recurring revenue stream. Investing in AI, which will benefit retail. Very well run and focused. Hasn't fully recovered from fears of tariffs impacting volumes.
In her firm's growth equity fund. But the pullback is prompting her to consider it for segregated accounts.
Since mid-May this has formed a golden cross (the 50-day moving average crosses the 200-day) based on a solid uptrend. The MACD momentum line now shows a buy signal. Also, the Chaikin Money Flow (CMF) measures buying and selling pressure, and it's positive (the buyers haven't gone anywhere). Trading volumes remain strong. Prime Day is in full swing now, though Wall Street could be disappointed with sales numbers (he thinks it's too soon to tell). Lang targets $260-270, though he doubts that.
This is the iconic company of the 21st century. You can't have a discussion about retail without talking about Amazon. However, the debate inside his company is whether this great company is a great stock. It is hard to measure its profitability now and in its future, and therefore hard to determine whether its price is high or low. They don't make a profit, they may never pay dividends or buy back shares. Normally, shareholders buy a stock to gain a piece of the company's profits, which come back to the shareholder in some way. Amazon operates outside of this model. The jury is out, for him, as to whether this is a good stock or not.