ROFL! 5yr P/E/G of 17?!
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2018-01-12 09:56 by Karl Denninger
in Company Specific , 209 references Ignore this thread
ROFL! 5yr P/E/G of 17?!
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No, it's not a bubble.

Not at all.

The FORWARD P/E on this piece of dogsqueeze is 162 and that assumes a doubling of EPS over the next 12 months.

The stock is up nearly 60% over the last 12 months which radically outstrips both earnings and revenue expansion.

May I note that this is a company that makes 1.2% in profit?  And by the way, that's not an aberration; the firm has basically never turned an operating profit better than a grocery store.

Ever, at any time in its history, which I remind you dates to the .COM start in the 1990s.

This is a company with more than $600 billion in market cap that generates only $16 billion a year in operating cash flow and just $10 billion in levered free cash flow (due to debt service, mostly.)  Said company has never, in its entire corporate history, managed to turn its insane sales rate into actual profits.


An aggressively growing company with a reasonable forward profit prospect may justify a P/E/G of 2ish.  Maybe 3.

17 is more than five times any other firm with real tenure in the market in history.

If you're in this stock now I hope you're prepared to lose far more than half from the current price.  I don't know how high it will go before that happens, but I'm damn sure it will.

You heard it here first: A collapse to somewhere around a reasonable P/E/G ratio would cut the price of the stock to about $250.

And that's assuming they're not forced to collect sales tax on all their so-called "third party" sales (they will be, one way or another, and probably this year), in which case that nice operating margin business (a 15% commission for what amounts to handling credit card charges at under a 2% discount rate) will contract materially and bury the company in a permanent flood of red ink.

Back in the 1990s Amazon went from about $2/share (in today's split-adjusted figures) to over $100 in the space of a couple of years.  I gave an interview shortly after selling MCSNet in which I was asked about whether I thought it should be bought.  My reply was that from the firm's history of inability to generate anything appreciable in actual profit margin, despite having a very impressive sales growth rate, I believed it was indeed a $2/share company and would be again.

It bottomed at roughly $4 in the .COM crash, which sounds like a horrid miss -- unless you bought it at $100, in which case being wrong by 50% still meant you lost damn near everything.  Of course if you held on you now have 12x your money, which some will point to in defense of doing so. 

However, if you had sold at $100 and bought at $4, well, well instead of having 12x your money you have something like 300 times as much, and you got to buy 20 times as many shares as well which means on a compounded basis you now have 6,000 times your money.

So please, do buy today at $1,300/share.  Trump relies on you eating 95% of that plus the entire opportunity cost from being in during the next crash for his daily proclamation on the "record stock market."  Oh, and do it on margin too.

Why not?  You can't lose with MAGA and Trump, right?

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