[dev_jim]

"We went through all of this in the Dot Com bubble in the 90s. Most people believed it was OK to invest lots of money in companies without profits"

This is silly. Amazon has real revenue that is growing at a fantastic rate. Pets.com and it's ilk did not.

"when Amazon might finally give a return to its investors."

It has given a return to it's investors. Up 655% in the last 10 years and 17,000% since inception.

[jimbokun]

"It has given a return to it's investors. Up 655% in the last 10 years and 17,000% since inception."

Only if you sold the stock at that price.

OK, Amazon is clearly not Pets.com. It has growing revenues and some profits.

But Amazon famously has a higher P/E than many other technology and Internet companies. This is only justified if Amazon has a clear path to greater profits and dividends than those other companies in its future. The article points out its not clear what this path for Amazon might look like.

This also makes me think of Facebook. As we waited for Facebook to go public, many speculated that Facebook was still in the stage of rapid growth, and it didn't matter that revenue and profits were low because eventually huge profits were guaranteed with so many users. Facebook is a profitable company, but since it's gone public, revenue and profits haven't grown the way people thought, and the stock is still below its IPO price.

My point is lots of users, lots of customers, and lots of revenue are necessary preconditions for a company to be worth investing in. But at some point, growing profits has to be a concern, too.

Maybe the best way I can phrase it: Do you want to be Apple or Amazon? Apple found a path to high profit margins, high growth, and a business generating lots of cash, and now they are both buying back stock and paying dividends to share holders. With Amazon, the profits, cash, and dividends seem always in the future, yet Amazon has usually had a higher P/E than Apple. Which do you think is the better model?

[dev_jim]

"Only if you sold the stock at that price."

Nope, you don't get to redefine a return as only realized gains. This is a very liquid and can be sold at anytime. I can borrow against it in my portfolio to get a mortgage, can use it for margin, etc.

"But at some point, growing profits has to be a concern, too."

Not when the cash can be more smartly reinvested in growth. Facebook is above it's IPO price btw which means growth is in line with a year ago.

"Maybe the best way I can phrase it: Do you want to be Apple or Amazon?"

Apple's growth has completely stalled and they have no clue what to do with $100B+ in cash which is the reason for their massive stock price fall. Amazon knows exactly what to do with their cash and is piling it into growth. This is a far more efficient use of capital for an investor.

And I don't know what it means to "be Apple or Amazon" but I'd rather be an investor in Amazon - and so would most of Wall Street.