| Sorry, I misspoke above. Rather than edit I'll just correct myself here. What I should have said is:
The expected future profits of Amazon would have to be 283x their own current profit (sorry, not Apple's profit), to arrive at a P/E similar to Apple's now. (In other words, to match Apple's strategy of extracting max profits to cash.) That is a smaller number than I implied above, but it would still require Amazon at some point in the future to make a profit of $178 billion in 2012 dollars--more than 4x Apple's current profits. To achieve that with, for example, the profit margin of Walmart (the current dominant retailer), they would need to do about $5 trillion in sales, again in 2012 dollars--about one third of U.S. GDP, or 1/14 of world GDP. If we spot them Apple's current profit margin, sales would still need to be about $670 billion--about $180 billion over Walmart's current sales (at much higher product prices). So while I totally understand the idea that Amazon is reinvesting for future growth, I just don't think future growth could ever be high enough to justify the stock price now. |