
Apple made more profit in three months than Amazon has generated in its lifetime - gscott
https://www.cnbc.com/2018/05/11/apple-made-more-profit-in-three-months-than-amazon-has-generated-during-its-lifetime.html
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tim333
There's a difference between the start of the dictionary definition of profit

a) noun 1. a financial gain

and

b) GAAP profits

Amazon has made loads of a) and not much b). Perhaps not coincidentally b) are
what you are taxed on.

The financial gains made by shareholders in each over the last 5 years as
reflected in increase in market cap are about the same for both - $626bn for
apple, $648bn for amzn.

For those not into accounting, roughly how it works is if your basic sales are
$10bn, costs $8bn then you can put the $2bn in the bank (apple) or spend and
expense it on stuff that will increase market share (amazon).

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kgwgk
If you spend those $2bn in tangible (and in some cases intangible) stuff that
is added to the balance sheet, you will still have $2bn of GAAP profit (and
will be taxed on it).

There are many ways to compare AAPL and AMZN. Another angle: one is trading at
5 times book value and the other at 25 times book value.

~~~
tim333
Yeah the trick is to spend the $2bn in ways which are expensed rather than
added to the balance sheet such as marketing, price promotions and so on.

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kgwgk
In you do “price promotions”, the sales are $8bn and the costs are $8bn. If
you overspend on marketing your sales are $10bn and your costs are $10bn. It’s
true that in those cases the profit is zero, so you won’t pay taxes. But it’s
not obvious that this market share gain will result in much higher profits in
the future. The trick is not guaranteed to work as intended.

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unstatusthequo
Also recall Amazon purposely tries to “stay flush” with expenses and revenue,
so naturally this article is true. Amazon sees to avoid taxes, and invests in
avenues of expense that benefit it rather than benefitting the tax man. The
theory being “how much tax to you pay on net zero income?”

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adventured
Is that also why Walmart and Costco have 2% net income margins? Or why Best
Buy makes a whopping $1 billion on $42 billion in sales? Or Target with their
fat 4% net income margins.

No, it's because mainstream retail notoriously has horrific margins. There is
no scenario where Amazon's retail business will ever generate meaningful
margins such that it could be a profit juggernaut. It is not a tax dodge such
that they could be yielding massive profits on retail, there is never going to
be much profit in that segment.

Right now the only way Amazon is yielding consequential profit, is courtesy of
AWS, which does have good margins and is producing nearly all of Amazon's net
income.

The retail business - which makes up most of their business - at a standard
2%-4% net income retail margin on ~$140 billion in retail sales, is worth an
optimistic $100 to $120 billion; you could push it to $150 billion if you want
to give them a larger growth multiplier.

First quarter AWS operating income: $1.4 billion

First quarter total Amazon operating income: $1.9 billion

All the profit-based value in Amazon is in AWS. Retail will always suck,
without exception.

That $500m in operating income on the rest of Amazon's $45 billion in sales,
is not very far away from the margin you would expect to see on a mainstream
retailer. $1b for that segment would be closer to normal if Amazon's growth
were more settled (as in the case of Walmart & Target). In this case, that
tiny retail profit is still be plowed back into dramatically higher growth
than what Walmart or Target have.

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Dwolb
Is your argument "Amazon is a retail business and Amazon doesn't yield high
profits because retail businesses have low margins"?

I guess that's true but so is OP's assertion that Amazon has a reputation for
reinvesting would-be profits back into the business.

By the way another way to look at Amazon is the retail business provides
significant operating leverage to enable AWS to yield substantial profits.

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hungerstrike
And yet, Amazon has given the world way more value than Apple could ever hope
to in its lifetime.

If Apple shut down tomorrow, nothing would really change. If Amazon shut down
tomorrow, they’d bring down everybody.

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_emacsomancer_
from the article:

> One Wall Street analyst believes Amazon is still in the "early stages" in
> many of its key markets.

With as many things as Amazon has its fingers into, it seems to me to have the
potential to end up more profitably than Apple.

~~~
prewett
Amazon's retail business probably has a pretty low margin, and I'm not sure it
can make it up in volume. Maybe AWS + Kindle make up for it, but I have my
doubts. If you believe in efficient markets (which I, personally, think is
bunk), then AMZN's 777B market cap to APPL's 926B means the Market doesn't
think so, either. Apple has both large volume and high margins, which is a
killer combination. On the other hand, I doubt Apple is going to grow much,
whereas Amazon probably has some growth left.

~~~
_emacsomancer_
Also, a lot of profitability is in Apple's high margins. If that ceases to be
a sustainable model....

~~~
mrep
Which is why Apples P/E is so low compared to compared to other tech stocks
which I think is totally reasonable. I just got a Pixel 2 and like it more
than my old Iphone 6S. With Apples profits so heavily tied to continual sales
of 1 main hardware product line, their profit can tank in just a few years and
thus I consider very risky.

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BigTex420
Economies. Of. Scale.

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dingaling
> Apple is vastly more profitable than Amazon.

And not a dime of that was paid to shareholders as dividends. So what does it
matter?

I once had a local businessman tell me that profit was a waste. You are such a
poor leader that you can't find a way to reinvest that surplus in your company
and its people? So you give a quarter of it to government and put the rest in
the bank so they can use it to make themselves money?

I'm not a fan of Mr Bezos but I think he has the right idea; if shareholders
aren't demanding cash then take the opportunity to feed the net revenue back
into the company. Some day the shareholders will wake-up...

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nerdwaller
I’m trying to understand what you’re going after here. AAPL has a fairly
substantial dividend (it was the biggest in the world last year[0], and
continues to be fairly substantial given the share price).

If you’re talking about AMZN then it makes sense as they buy up more
verticals, reinvesting any profits to growth.

In either case the two companies are at different phases of their cycle. Apple
is in the stable dividend mode while Amazon is still growing. Either could
choose to change that, of course, but shareholders have expectations and to
some extent both organizations are up to the whims of shareholder voting.

[0]
[https://www.google.com/amp/s/www.cnbc.com/amp/2017/05/02/app...](https://www.google.com/amp/s/www.cnbc.com/amp/2017/05/02/apple-
now-pays-the-biggest-dividend-in-the-world-surpassing-exxon.html)

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motohagiography
Amazon is useful and makes good margins on economical services, where Apple
basically defines middle class identity.

Where Amazon is something you use, Apple makes something you identify as part
of your personal story. Instagram has a similar play, where it is a platform
for democratized celebrity, people "become," Instagram famous. Facebook is
more of an individual signalling tool for people who have already won, or who
just don't understand the game. To me FBs long game looks like a dystopian
malignant Equifax.

Oddly, Reddit has Instagram level upside if only they could hire someone with
vision, and build an org that could execute on it instead of handwringing
about solving political problems.

Apple is a gatekeeper to aspiration, and the demand characteristics of that
are unlimited. The stat in the article does not surprise me at all.

