tag:blogger.com,1999:blog-8152901575140311047.post7773219489465394208..comments2024-03-28T08:49:51.975-04:00Comments on Musings on Markets: DCF Myth 2: A DCF is an exercise in modeling and number crunching!Aswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-8152901575140311047.post-73024407004080180112016-04-18T15:07:15.344-04:002016-04-18T15:07:15.344-04:00Jonas,
I did not get around to posting on the thir...Jonas,<br />I did not get around to posting on the third myth and beyond (because I got distracted and moved on). I have a paper on the topic, though, that you may find interesting:<br />http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2323621<br />Hope you find it useful.Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-64535230087488973932016-04-18T13:14:37.983-04:002016-04-18T13:14:37.983-04:00Dear Aswath,
I am currently writing my master'...Dear Aswath,<br /><br />I am currently writing my master's thesis about DCFs in startups. Where can I find your blog post about DCF myth 3?<br /><br />Kind regards,<br />JonasJonasnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-4178388350444660362015-08-12T10:07:13.088-04:002015-08-12T10:07:13.088-04:00Azam,
Fair enough.
1. On the two part story, you ...Azam,<br />Fair enough. <br />1. On the two part story, you may very well be right. One is their own retail wing. The other is their online platform being offered to other retailers. While the revenues from the latter may be large, the margins will be paper thin because you are just an intermediary. I will try to break them out into two channels on my next valuation. <br />2. The revenue is just an computational starting point. The driver is income, which is revenue * margin. If you replace GAAP revenue with GMV, you will have a much larger number but your margins will be much smaller.<br />3. You are right about the expensing, but I don't think Amazon makes lots of non-GAAP profit. You can go product by product and on every one, you will see that Amazon sells at cost. Even Amazon does not claim to make money. It just promises that it will find a way soon to do so.Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-61959574635138844712015-08-12T09:36:34.734-04:002015-08-12T09:36:34.734-04:00Dear Professor,
I respectfully disagree with your ...Dear Professor,<br />I respectfully disagree with your Amazon assumptions leading to distortions in valuation in my opinion.<br />1. Amazon is a two-part story: AWS and Amazon each should be valued separately and each is a leader by a far margin.<br />2. Amazon is mistakenly valued based on GAAP revenue and not GMV. Please note that Amazon GMV is expected to pass 220 Billion in 2015.<br />3. Amazon makes a lot of non GAAP profit. Please check "cash flow from financing activities" over its public history. It has made no capital increase and minimal debt use. Kindly, correct me if I am wrong, but I do not think any company can grow like this without profits to reinvest. It tries to expense everything and pays minimal tax in the process.<br /><br />Azam<br /><br /> Anonymousnoreply@blogger.com