Well, maybe Amazon is the greatest thing since sliced bread, but that doesn’t explain how it gained $25 billion of market cap overnight after reporting another losing quarter. Give all the credit you want to its web services business – – a newly disclosed but decade old operation with scads of competent competitors and which sports a modest $6 billion run rate of sales that may or may not be profitable on a fully-loaded cost basis – -and it still doesn’t explain today’s buying panic.
What can’t be denied, however, is that Amazon’s first quarter red ink brought its LTM bottom line to negative $406 million. That’s its worst result since way back in December 2001 when it posted a LTM loss of $567 million. And it marks the 18th straight quarter in which its LTM net income has been going downhill from the modest peak of $1.1 billion it posted for the four quarters ended in September 2010.
So what we apparently need to do here is reverse Wall Street’s normal admonition to value a stock based on its possible earnings next year or the year beyond, and, instead, compute a backwards looking PE multiple. To wit, the casino today is valuing Amazon at 190X the earnings it used to have 55 months ago!
This post was published at David Stockmans Contra Corner on April 24, 2015.
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