tag:blogger.com,1999:blog-8152901575140311047.post8273536047779993811..comments2024-03-28T06:23:58.716-04:00Comments on Musings on Markets: Do markets punish long term thinking? Amazon as a case studyAswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-8152901575140311047.post-19225466269398885462013-07-30T09:00:11.967-04:002013-07-30T09:00:11.967-04:00Thanks for the wonderful post, only one doubt:
&q...<br /><br />Thanks for the wonderful post, only one doubt:<br /><br />"A growth stock is cheap only if the market price reflects that cost"<br /><br />Can anyone help me in deciphering the above insight?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-41621291498912717782013-02-28T07:56:37.696-05:002013-02-28T07:56:37.696-05:00Amazon.com, Inc. is an American multinational elec...Amazon.com, Inc. is an American multinational electronic commerce company with headquarters in Seattle, Washington, United States. It is the world's largest online retailer. Amazon.com started as an online bookstore.<a href="http://www.technologyport.blogspot.com" rel="nofollow">latest technology</a>marcos bakermhttps://www.blogger.com/profile/11923768249840498382noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-55835860387441830042012-11-07T04:37:50.066-05:002012-11-07T04:37:50.066-05:00For every business value, popularity and quality i...For every business value, popularity and quality is the most important things, with these things only that business will become successful and profitable. I think these are possible with the help of franchise.<br /><a href="http://www.cafranchiseopportunities.com/best-franchise-opportunities" rel="nofollow">best franchise</a>Anonymoushttps://www.blogger.com/profile/02035299584559001367noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-28053332318651827992012-07-26T17:53:06.537-04:002012-07-26T17:53:06.537-04:00any updates professor ? Is it time for the "A...any updates professor ? Is it time for the "AMZN valuation for year 2012" ? ! :-)<br /><br /><br />thanks in advance<br />SubuSubuhttps://www.blogger.com/profile/09106513875910594290noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-10275680322614727902012-03-30T06:30:50.735-04:002012-03-30T06:30:50.735-04:00Stocks are affected by many aspects and this could...Stocks are affected by many aspects and this could be one of them. Everyone is looking to get rich quick so stocks that has stable but very slow growth are not attractive for many investors so there is no demand and stock price goes down. <br />This is only one theory, but could be inaccurate for many other cases.Stevenhttp://howtostopstuttering.co/noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-52678761092966025132012-02-14T14:56:15.739-05:002012-02-14T14:56:15.739-05:00To @anonymous last comment , I don't really kn...To @anonymous last comment , I don't really know.mensajes movistarhttp://mensajes-movistar.com/noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-46288162831808100862012-02-09T22:23:39.677-05:002012-02-09T22:23:39.677-05:00How did you get Amazon cost of capital of 8%? How ...How did you get Amazon cost of capital of 8%? How did you calculate it? And why is sometimes as a cost of capital used WACC, and sometime it's just some so-called riskfree rate like goverment bonds? And why your WACC is changing every year? Why some calculations have always the same WACC( it's not changing like yours). <br /><br />I'm watching your valuation and corporate finance lectures( i'm little bit behind). <br />TnxAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-41403042761018031652012-01-04T11:02:44.200-05:002012-01-04T11:02:44.200-05:00Hi Professor,
It appears that in your model you a...Hi Professor,<br /><br />It appears that in your model you assume Amazon to remain a retail company for the next 10 years. <br /><br />But with AWS becoming a prominent part of Amazon's strategy, don't you expect the SaaS business segment bringing in a higher % of revenues. If this does happen, the margins would be much more than 4-5%. <br /><br />What do you think ?Rohanhttps://www.blogger.com/profile/14370832652315169559noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-8018325043625031092011-12-31T20:33:08.938-05:002011-12-31T20:33:08.938-05:00Mike,
I have always believed that managers who foc...Mike,<br />I have always believed that managers who focus on maximizing stock prices and spend immense amounts of time in the feed and caring of analysts (who they believe will help them accomplish this) are misguided. Maximizing value is much tougher to do and good managers recognize that it is hard work and has nothing to do with analysts. If Steve Denning has a problem with stock price maximization, I understand. But his article specifically focuses on value maximization as if it were interchangeable and it is not.Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-6930693651199405052011-12-31T12:35:34.749-05:002011-12-31T12:35:34.749-05:00Prof,
In this world, for the super-majority of t...Prof, <br /><br />In this world, for the super-majority of the investors, maximizing the firm value and maximizing the stock-price are synonymous. You might be one of the few exceptions. Are you? <br /><br />What is the reason you invest? To fund your retirement, children's education? OR just to feel good about the value of a company and never cash out? <br /><br />The said article was proposing to change the incentive structure for the management. ( ie, structure of stock options, bonus etc).Mikehttps://www.blogger.com/profile/07355513525615592382noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-1918883121811389222011-12-31T12:24:11.793-05:002011-12-31T12:24:11.793-05:00--Mikehttps://www.blogger.com/profile/07355513525615592382noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-21388523725535697522011-12-30T08:13:09.156-05:002011-12-30T08:13:09.156-05:00If Steve Denning actually knew what maximizing val...If Steve Denning actually knew what maximizing value was all about, I would react. I think he misunderstands the concept and mixes it up with maximizing stock prices, which he then confounds with analyst expectations. The only thing radical about his ideas is their sheer confusion.Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-33423054438858761072011-12-30T01:53:58.154-05:002011-12-30T01:53:58.154-05:00I am curious generally what you think of Steve Den...I am curious generally what you think of Steve Denning's writing [1] and proposals? More specifically do you think it helps to understand the case of Amazon's fluctuating valuation on the market?<br /><br />[1] Steve Denning's recent article published by Forbes: http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-81757553904158857442011-12-26T04:33:34.665-05:002011-12-26T04:33:34.665-05:00Its really a nice case study..Really you did a gre...Its really a nice case study..Really you did a great and intresting study..From this we know so many things..Web hosting companies in indiahttp://www.adodis.com/Web-Hosting-Companies-in-India.phpnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-56059545310570580292011-12-20T09:25:53.635-05:002011-12-20T09:25:53.635-05:00They break down revenues but not operating income ...They break down revenues but not operating income for digital media, but they have been very open about the fact that the Kindle does not make them money right now but they hope it will in the future. In fact, that is the basis of the Stewart argument that they are long term thinkers... And the market is giving them credit for it. My question is: Are they getting too much credit?Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-21622402220265307342011-12-19T23:50:49.465-05:002011-12-19T23:50:49.465-05:00Amazon's margins have been shrinking for a whi...Amazon's margins have been shrinking for a while, but people simply assumed it could make up for it by increasing their volume of business. The newest shift to e-readers is somewhat of an admission that their old model can no longer keep that rate of growth. <br /><br />I'd be really interested to know what the margins are on digital media for Amazon. Do you have any idea?Jason DaCruzhttps://www.blogger.com/profile/15586277884128262631noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-69114324077664649612011-12-19T09:50:38.850-05:002011-12-19T09:50:38.850-05:00Yes, a 90+ leading and trailing PE being given to ...Yes, a 90+ leading and trailing PE being given to Amazon already reflects pollyannish conviction of a cornucopia of profits in the "long-term" already priced in.<br /><br />And I can't pass up James Stewart's lament about Wall Street's seeming short-term bias without this rhetorical snarky Keynesian quote:<br />"In the long run, we are all dead."Ray Kumarnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-36071256093360518082011-12-18T17:18:33.735-05:002011-12-18T17:18:33.735-05:00Agree that Amazon does not look cheap. The effecti...Agree that Amazon does not look cheap. The effective rate of growth in market capitalization of 33% per year ($4.55 billion in 2001 to $82 billion in 2011) is about 3.3x the growth in earnings for the same period (if my calculation is correct). Do you think one of the main reasons -besides costs- why most active managers underperform the averages is because of the unsuccessful attempts to guess the timing and length of reversion to the mean ? Thank you.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-29934592237333194932011-12-18T17:04:04.408-05:002011-12-18T17:04:04.408-05:00The 4.5% is roughly what a mature company's co...The 4.5% is roughly what a mature company's cost of capital exceeded the risk free rate in 2011. In this spreadsheet, I don't allow for specific inputs for the cost of capital but if you want a more complete spreadsheet, you can download the fcffginzu.xls spreadsheet on my website.Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-27417521337962239232011-12-18T15:59:45.311-05:002011-12-18T15:59:45.311-05:00I had a couple questions regarding the numbers in ...I had a couple questions regarding the numbers in the spreadsheet. Firstly, in DCFValuation you add 4.5% to the riskfree rate in cell b15. Where did this number come from?<br />Secondly, why is the reinvestment not subtracted from year 0 (cell b7), using the amount reinvested from last year as the base from which to add? It seems like it would be accurate to do this, because as it is, the year 1 fcff is less than year 0. <br />Also, what were your inputs to compute the cost of capital in the input sheet?<br />ThanksDavehttps://www.blogger.com/profile/03128620600414782869noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-34015666286723134552011-12-17T19:51:33.198-05:002011-12-17T19:51:33.198-05:00hi there, perhaps you should start considering usi...hi there, perhaps you should start considering using google spreadsheet. it will help to spread your ideas much easierKyithhttps://www.blogger.com/profile/07617228143744544821noreply@blogger.com