Amazon Missed On All 5 Key Metrics: Business Model In Jeopardy While Analysts And Investors Are Pleased
by Timothy Phillips
This is the follow up article to "Amazon Earnings Preview: The 5 Metrics to Watch." I have developed five key metrics that are leading indicators of whether or not Amazon (AMZN) will fulfill its promise of delivering the type of net margin, cash flow and long term growth both analysts and investors expect. For the past eight quarters all of these five metrics have trended in the wrong direction leading me to write a prior article entitled "Average Selling Price is the Smoking Gun that Sinks the Amazon Business Model." Those trends continued, and in most cases accelerated in the just completed 4th quarter. Analysts are dead wrong to point to gross margin increases as a sign of a healthy business model, as that metric is a false indicator of potential with Amazon. Amazon is simply transferring costs below the line so that while gross margin goes up, net margin will continue to drop (case in point: in the 4th quarter net margin was cut in half as gross margin improved 330 basis points). Let's review the five metrics and the updated new data. read more »
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