How the hell does this happen?

Amazon misses its earnings, income fell, sales missed Wall Street consensus and… the stock price goes up 6 percent.

Apple sells a gazillion of everything, reports record revenue and profit, and its stock falls.

  • To profit, or not to profit. That is the question. 😉

  • How could we explain this? Hmmm… let me try… The nasdaq is based on nothing. Oh wait… Another one: Analysts are as just a bunch of clowns — yeah, a combination of both I guess 🙂

    • Jean-Paul Kaufmann once said: “The economy depends about as much on economists as weather does on weather forecasters.” I believe same thing would apply to financial analysts and stock brokers.

  • tylernol

    Amazon somehow has perpetuated this belief that they are on the verge of printing shit-tons of money, just give them a couple more business plan pivots and they will figure it out. Amazon is almost 20 years old, folks, they are not a 2 year old social web startup. Time to ask them when they are going to actually have decent margins.

  • Two trains of thought in my head right now.

    1. Apple will always be the company that lost to Microsoft. It’s bound to do it again, but this time with vastly more money at stake.

    2. The past success of Apple is just potential future failure. Apple can’t keep doing well because Apple. Amazon past failure is potential future success because Because.

    Note, I’m just trying to reconcile the empirical data. I don’t actually believe either of these, but it seems that a lot of people do.

    • JohnDoey

      The common theme in your 2 points is 1995. That tells us something about the average age of Wall Street investors and how far behind they are in technology.

      I think what will catch them up is when Dell, HP, Sony, Acer, and a few others all go out of business (or at least out of the PC business.) Now that Windows 8 has come and gone and Windows PC sales are still shrinking, there is a reset coming where investors rethink their investments in anything dependent upon Windows PC sales growth.

      If you are an old salty Windows 95 user, go to the Logitech web site and it is all iPad iPad iPad. It’s a new era of personal computing.

  • Robin Hood mentality? Amazon “gives” to us (keeps $ in our pockets) so people like them more on a humanity level and Apple is taking from us w/ their high margins?

    Wild guesses at it but I do wonder if it is a psychological thing.

    • tylernol

      that could be part of it. It could also be the expectation that Amazon will eventually gain a monopoly on sectors such as electronics, books and e-books. They just need to burn a bit more money until all Barnes and Nobles and Best Buys are closed. Then they can start raising prices and reward investors…

      • I doubt it. Their goal is to give us the lowest price possible. If they change that, they become less attractive and we return to shopping locally/elsewhere.

        Low price is their #1 product and they can’t afford to lose it.

        • tylernol

          where would elsewhere be? What if Best Buy closed their doors? Where would you get your 4K TV?

          • Wal-Mart or Fry’s Electronics.

          • tylernol

            Fry’s is rumored to be going bankrupt. So Wall-Mart, Target are the remaining viable competitors.

          • Until the rumor is fact and Amazon raises prices, I’m not worried.

          • JohnDoey

            I’ll get my 4KTV at the same place I’ve been buying all of my consumer electronics for the entire 21st century: Apple Store.

          • Your 1080p came from Apple too?

    • JDSoCal

      Unclear on the concept of a for-profit business, and the fiduciary duty of a publicly-traded corporation to stockholders.

      • Me? No. I run companies so am very clear.

        Some investors invest for $$, others for the cause. Maybe that’s why investors aren’t up in arms over low margins and losses.

        • JDSoCal

          Oh please, find me 3 Amazon investors who aren’t in it for the $$ return.

  • matthewmaurice

    Money quote: “Incidentally, that means the company doesn’t actually have a trailing-12-months price-to-earnings ratio, since there were no earnings for the past 12 months.”

    With reactions like this, is it any wonder the Wall St. “geniuses” nearly destroyed the World economy?

  • KvH

    They just keep introducing products that change the world, one right after another.

  • tyr

    It’s the Wall Street groupthink: “everybody” knew Apple was going to go down if they didn’t meet estimates, so they went down; “everybody” knows Amazon is a good investment, so it rises. Don’t worry to much about the day-to-day ups&downs, they call having a positive outlook for a stock “being long” for reason.

    • matthewmaurice

      Some “good investment.” Amazon itself projects first quarter “operating income anywhere between a loss of $285 million and profit of $65 million.” So their best case scenario is Apple’s income from about the time it takes me to write this post?

    • BC2009

      AMZN is worth $118B in market cap today with hardly any cash assets. If you invested $118B today and AMZN doubled their profit over the next ten years, your investment would be worth $128B in ten years (assuming you could sell your investment for the original $118B after taking the profit for yourself).

      AAPL is worth $430B in market cap today with $130B in cash assets. An investment in AAPL of $430B would only be a risk of $300B since you would instantly get back $130B in cash. AAPL earned over $40B last year and even if things declined for them can conservatively make $30B per year for the next ten years. That means you would be risking $300B to make $300B in ten years time, then you could sell your interest in the company for $430B (including the cash assets the company had when you bought it and assuming you earned no interest on that cash) and walk away with $300B in your pocket.

      In review, I am using numbers that project a 100% increase in AMZN profitability and a 25% decrease in AAPL profitability. Even with those numbers, AAPL is a better investment.

  • Jason

    There’s just no other way to say it: the (American) stock market is a game of large investment controlling value. No other explanation makes sense.

  • Apple is built on a culture of hypocisy and arrogance. That’s why.

    • JohnDoey

      Examples, please.

  • outlook. investors care less about what you did last quarter and more about what you will do in the future

    • BC2009

      Outlook? really? can you do math?

      Even if Amazon doubled their profitability in the next ten years, if you bought the company today for the $118B market cap you would only make $10B in that ten years time.

      If you bought all of Apple today for $430B, you would instantly pocket back $130B in cash and your risked $300B would earn you at least $300B in profit in the next ten years (assuming $30B per year which is 25% LESS than Apple made last year).

      So what sort of outlook are you looking at? Fifty years down the road? Who even knows if Amazon will be relevant in ten years? Who says Walmart does not figure out an online strategy that puts them out of business.

      AMZN is a really long term bet with no proof of profitability. AAPL is an almost sure-fire bet to make money faster than the government can print it.

    • matthewmaurice

      Amazon’s own “outlook” is a big loss to a small profit, at least in the near future. In the far future, we’ll all be dead.

  • I think the simple answer is two-fold.

    One is that Amazon’s story is easy to digest (we’re Walmart for the always on era), whereas Apple’s story is complex (hit driven products; multiple breadwinners; integration of hardware, software and services, retail stores; high margin player in industry where consumer electronics has largely been a low margin business).

    Two is that Amazon was doubted for so long during the dot com period that once they embarrassed the analysts and did not run out of cash, analysts were never again going to bet against the company again. Bezos plays this one to a tee by wearing the fact that he is comfortable with investors being confused with what the company is up to for long periods of time.

    By contrast, Apple is exceedingly open with investors (in terms of metrics, milestones, etc)…and gets dinged for it.

    • Bob

      To be more specific. I think AMZN the stock price is divorced from Amazon the company. I think Wall St. sees investing in AMZN as a hedge against retail dying (which it surely is). So, for now it can do no wrong (unless it seriously screws up)

      My biggest concern is that someday when retail is mostly dead, Wall St. will then ask Amazon where the profits are, but I don’t think Amazon will ever be able to turn that corner, and then the house of cards will come crashing down.

      OTOH: Apple makes and sells real products and I think will be a much better long term company and investment.

      • FWIW, I am LONG on Apple, and specifically called Apple Investors a ‘Cry Babies’ for the way they responded to the earnings last week (

        That stated, I don’t believe that Amazon is a house of cards. Just that their value is disconnected from their actual performance.

        • Bob

          I mean that their stock price is a house of cards, and that some day they’ll never be able to deliver the profits that Wall St. will eventually demand.

          Frankly, I think a fair valuation using most metrics would put AMZN under $40 / share, but what do I know. I think long term it would be an epic short, but its too risky because “Wall St. can remain irrational longer than you can remain solvent”.

          • Got it. That is a valid viewpoint. At some point you get to a calculus of what Amazon is worth when a good enough competitor to Amazon emerges (thereby either capping their margins permanently, or forcing a business model based upon differentiation types of margins).

            There was a great article last week on why that’s a lot harder to accomplish than it sounds. Beyond the best practices which Amazon has cultivated over the years and the culture that yields it, it takes mega cash and a willingness to lose a ton of money for a decade or more.

            No big existing company can do that, and there are no obvious upstarts either.

          • Bob

            True. But there are niche players that I think hold their own against Amazon in certain categories and I think this is where the competition will come from, for example: NewEgg, and maybe Costco or LL Bean.

          • I guess the question there is whether staying competitive in a sub-segment is enough of a wedge to make a difference in Amazon’s momentum?

            To me, it seems the answer is no, although I definitely could see a category killer where the niche commands such a strong beachhead, while establishing a billing relationship that they can “land and expand” from that base.

            If you think about it, that is part of the genius of Amazon Web Services. Amazon gets visibility to the scope of many of these companies’ ramp before they become a serious threat. Think: Netflix, an AWS customer.

          • JohnDoey

            I think Amazon will be obsoleted by millions of traditional stores that get their technology together.

            We used to think that we were creating a cyberspace universe that we would visit for some amount of time per day by “going online.” But the opposite happened: we wired the real world with wireless Internet and GPS and so on and turned the real world into cyberspace. With an iPhone, now you’re online all the time.

            We used to think that Amazon’s online store would get 3D imagery and you’d put on some kind of headgear to simulate walking around in a store. But the opposite happened: we walk around in an actual store with an iPhone in our hands, with a welcome message from the store offering us a 10% discount today. And it is easier to pay with your iPhone than to type in your credit card online.

            So Amazon’s lack of physical stores is actually a lack of a new, high-tech feature: the Internet-enabled, smartphone-aware, brick-and-mortar store. The prototype of which is Apple Store.

            So you end up shopping online at Target, because you saw the items you wanted at a Target store, and because you can take something back to the store to get a refund or replacement if you want to.

            Target has the opportunity to enable you to run a Target app while shopping in a Target store, and you scan the items you want as you go, putting them back on the shelf after you scan them, and then when you are done shopping, you approve an online order and the items are shipped to you.

            Wal-Mart also has that opportunity. Many other retailers. Amazon doesn’t have the opportunity to do that.

          • There is definitely an opportunity for brick and mortar to reinvent itself, but in most cases, it is going to come down to the product. Is it sufficiently differentiated to command margins and warrant the spend to own the channel?

            If you are Zara, the answer is yes, because your whole business is predicated on moving fashion from runway to retail in two weeks, which in tandem with small lots, yields high margins and high visit recurrence.

            If you are Best Buy, it’s probably game over.

  • Buy on rumor. Sell on news.

  • RT @jury “Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers.”

  • Travis

    I’m not a stock guy but I’m gonna guess real money is made by picking the cheap stocks that will become the expensive ones? And because apple became the most valueable company, doesn’t that kinda suggest they aren’t the best cheap bet anymore?

    From my very uneducated perspective, it seems like like we are looking to the stock market to define the winners and losers… And this seems to suggest apple is losing? But the market is a game… And the object is to make the most profit on a stock… While I still think apple stock could go higher, I’m not sure there’s as much profit to be made as opposed to a cheap stock that magically takes off

    • JohnDoey

      I think what you missed is that “iPad, Inc” was a very small company in early 2010, but is now the world’s #1 PC maker by volume. So if you bought some Apple stock in 2009, you might have thought you were investing in a giant company called “Apple” with no room for growth, but you were actually investing in a tiny company called “iPad” with dramatic room for growth.

      In 2009, iPad was adding $0 to Apple’s stock price, but today it is adding $100 or more. So people who had Apple stock in 2009 essentially invested $0 in “iPad, Inc” and got $100 in return. So iPad stock was a very cheap stock that became an expensive stock.

      What people who are new to Apple don’t realize is that the idea of Apple doing iPod in 2001 was outrageous and amazing and even controversial. Same with iPhone before it shipped — it was really controversial for Apple to do a phone. After iPhone shipped, it turned out to be a next-generation iPod combined with next-generation Mac and it looks more obvious in retrospect. And even a tablet PC in 2010 was controversial.

      So there are a host of things that Apple might do in the future that people simply don’t consider now. Like a car for example, or a motorcycle, or a bicycle. If you look at an electric car, it is an iPhone with wheels. They even use the same batteries (the iPhone has 1, the car just has hundreds of them.)

      So when you invest in Apple, you may also be investing in a new car company, and you’ll get one share of that car company for $0 for every share of Apple you own. That is a cheap stock with a lot of growth opportunities.

  • What I tell you that I expect, is not actually what I expect, I expect much worse or better, but don’t want to scare you or discredit myself if am too far out, right or wrong, it matters not, I need flow.

  • Um…buy low, sell high?

    Seems pretty straight forward to me.

    • BC2009

      Then people should be buying AAPL because if you read my 10-year analysis above it is definitely “low” and AMZN is definitely way high.

      • Couple things: One, very few people are going to go chasing through comment threads to find anonymous stock market analysis.

        Two, if your analysis is predicated on someone buying the entire company, and you’re examining only a company’s 10-year profitability, you fundamentally misunderstand how stock markets work. Like, by an unbelievably huge margin.

  • People who dis-invested from Apple has to invest somewhere and Amazon, it is!

  • I use Amazon plenty, but with no profits now or on the horizon, value to investors seems odd at best.

    What is the plan, Mr. Bezos? Drive everyone else on the planet out of business, then finally raise prices to make a dime? I smell something fishy here.

    • JohnDoey

      Yes that is the plan. It used to sound less nefarious in the mid-90’s when it was good-guy-Internet-company Amazon working to replace tired-old-brick-and-mortar retailers Everybody Else. Now, the lines are much blurrier when Wal-Mart has an online store and Wi-Fi and sells iPhones.

      But some investors haven’t gotten the message that it is not the 90’s anymore.

  • It’s faith-based investing, based on some wacky voodoo nonsense that has no connection with reality.

  • We now all know that gamblers rule Wall St.

  • Gazzah

    I am an Apple fanboy, so understand that…but stock valuation is about future expectations not past earnings. Perhaps expectations of Apple have been unreasonably high. I think so.

    • BC2009

      See my post above. I will sum it up here:

      1) AMZN market cap is $118B. Assuming a 100% increase in profits for AMZN for the next ten years, you could buy the company and make $10B in the next ten years for the $118B you risked. You stand to make 9% on your money over a ten year period.

      2) AAPL market cap is $430B. Assuming a 25% DECLINE in profits for AAPL from last year over the next ten years, you could buy the company today and make $300B in profit for the $300B you risked (you only risk $300B of your $430B, because purchase of AAPL comes with $130B in cash assets held by the company). You stand to make 100% profit on your money over a ten year period.

      So please please tell me what sort of “expectations” there are that somehow make AMZN a better investment here. AMZN would have to see a 1000% (e.g.: 10x) increase in earnings for the next ten years to compete with an AAPL that saw a 25% decrease in earnings.

      I suppose investors might be betting on AMZN for their profitability 20 to 30 years from now, but I doubt that.

      Put another way, if AAPL valuation holds constant in the next ten years despite a 25% decline in earnings, AAPL will be able to take the company private with cash assets alone. Can you imagine what AAPL stock might do if a 25% decrease in profitability came to pass? They might be able to buy their company back from the public within five years time.

      AAPL is clearly under-valued and AMZN is clearly over-valued (i.e.: there are dozens of funds that earn you 10% in one year and AMZN can’t do that in ten years).

  • The answer is simple, Jim. Bezos isn’t a profiteer, he’s a free cash flower.

  • Tvaddic

    Someone stated that Amazon has made less than 5 billion in profit collectieveally, since they launched, that’s horrible. I think Amazon is great, but they lose money on EVERYTHING.They lose money on Kindles, Amazon Prime, eBooks, their huge marketing, trying to compete with Netflix etc. I like Amazon, but it astonishes me that they have so much good will on Wall Street.

  • HowmaNoid

    AAPL is suffering blatant price manipulation. The SEC needs to wake up.

  • JohnDoey

    What Apple needs to do is rebrand their stock. The current AAPL is too famous and it is gamed and trolled mercilessly, creating a threat to the core business.

    I recommend the stock ticker “MOOF” for the real Apple and use AAPL for a line of Apple logo clothing and accessories. Let the trolls game the fashion stock. That is appropriate.

  • ShawnL

    Never try to use short term stock market movements to understand anything. Over the long term its much more in line with companies’ performance and the economy in general.

    • matthewmaurice

      Over the “long term,” why is this stock worth ANYTHING? In 20 years of business they’ve earned less profit, cumulatively, than Apple did last quarter. The amazing thing is that over those 20 years plenty of people have made money on this stock on the assumption that Amazon will finally start to make serious money in the “near future.”