A close friend and I have had an ongoing debate over Amazon for quite some time. He argues its overvalued and is generally short on the stock and I strongly believe they are one of the greatest companies of our generation. Their revenue continues to grow rapidly year over year while net income has remained at almost zero for the past twenty years. Who is right?
Although their multiples are obviously quite high they are still, and will remain, one of the greatest companies on earth. I won't get into my entire argument here, but I do want to bring up one point that is more philosophical than anything else. I believe one of the factors that separates Amazon from the other tech giants is their willingness to ruthlessly reinvest profits to fuel future growth. Apple is sitting on somewhere around $140bn, Google & Microsoft about $50bn each, leaving me to believe they have lost the ability to allocate their capital efficiently. A failure of imagination. These companies have hundreds of billions of dollars earning close to no return, meanwhile Amazon is busy creating the future and putting their money where their mouth is.
As it so often happens I came across a much better description of Amazon's business model from Benedict Evans. He is one of my favorite tech bloggers and I highly recommend spending some time reading his overview of the company in addition to any of his other posts.