I'm no business genius but can anyone explain Amazon's business model? They make virtually nothing in profit, so how does the company run and what is their long term plan?!
Dunno where you're getting your information from, but how many companies have a share price history like below, bearing in mind the time-line is during a global recession:
Take a look at this article. It explains why Amazon makes a loss. TL;DR version: it makes an operating profit, but is currently ploughing that profit back into building new fulfilment centres and shipping alternatives. As for their long-term plan? I'd say global domination
Share price doesn't necessarily equal to profit. Share price is based on potential return on investment, which is different from actual profit. They have stonking revenues though. It's probably my mistake, I probably should have said: They make nothing in yearly net profit. Thanks for the link Fibble, didn't realise that they're basically constantly investing everything they have. I was looking at the bottom line as opposed to the inbetween details.
No, but there is no better indicator, do you really think people are buying Amazon shares because they run at a loss? ....Although bear in mind there is a marked difference between declared profit and actual profit, all the big corporations take measures to look like they earn next to nothing to avoid taxation. It is also partly based on projected return, but Amazon shares haven't been sky rocketing for almost 2 decades( during a global recession ) because of potential return ....that trajectory is all about cold hard cash/profit/return.
Profit is hardly the be-all and end-all of a business. Business from one man bands up to medium or large sized nationals generally want to minimize profit, as it's what you get taxed on - that and personal income. Then the massive nationals, and internationals tend to either I) be making so much profit that they just don't care, see apple or II) wrangle their way around tax laws, see Starbucks. That amazon are ploughing their income into infrastructure and etcetera rather than mucking about otherwise is laudable, so many businesses that rented their properties have gone to the wall, see Woolworths.
I think you will find that profit is actually the be-all and end-all of a business. Just because a company chooses to re-invest it's profit back into infrastructure/expansion, doesn't mean they are not turning a profit, it just means they have re-invested that profit back into the business, probably to avoid taxation, they will find other ways to extract that money tax free, like share dividends or pensions etc. Apple has a $100bn of untaxed profit sitting offshore, which means they have more cash on hand than the United States federal government ...you have to ask the question why this obvious profit does not show up on the books inside the US.
Profit is generally a bad idea, it only gets taxed. Always better to shift it elsewhere somehow and keep it off the bottom line.
By its definition profit is good if your the owner of the company. Presumably the pursuit of profit is why you'd do so. In the case of Amazon the owners (shareholders) have consented to a policy of heavy investment in the business the hope being Amazon and hence the owners (shareholders) can achieve a greater future profit.
^^as long as the share price continues to rise they are seeing a profit in the short term ...as for re-investment, the value of assets & holdings also contribute to share price. A good example of having your cake and eating it. ......Amazon shares were very tightly held by a few entities. So I looked it up on AOL Money & Finance and found the following. Jeff Bezos still holds 24% of the stock Legg Mason Capital Management, Inc. holds 20.25% T. Rowe Price Associates, Inc. holds 7.5% TCW Asset Management Company holds 5.5% ClearBridge Advisors 5.25%. You can see that the top five shareholders control 62.5% of the stock.
Profit is making money. Most companies try to make the bottom line as untaxable as possible. As I understand it, if you make 1000 profit you are taxed on 1000 so make 1000 minus tax. If you make 1000 then reinvest 999 in r and d or some other stuff then you make 1. Basically nothing. Although you actually make a lot more, but you don't get taxed on it. I don't agree with Starbucks et al and tax avoidance, but then we get political and stuff. The massive disproportionate balance of wealth and 1% 99% principle. The only way to change it is to boycott the multi nationals and go back to home grown local companies. But it won't happen. Unfortunately. Sent from my GT-I9505 using Tapatalk
Wow, that would have been some investment back in 2008. Never even realised they have skyrocketed that much. Impressive. Arseholes, but impressive arseholes.
