Super-Seller Amazon Rates a Sell
a brokerage-firm analyst after my own heart. Banc of America Securities' Aram Rubinson won my devoted admiration with the first line of his recent research note: "We think Amazon.com is a retailer."
Hallelujah. It may have taken five years or so, but good things happen to those who wait. Or something like that. Not that I've been waiting for good things to happen so much as I've been patiently waiting for the day when Wall Street ends this nonsense of giving blue-sky premiums and special treatment to Internet-era darlings, including, but not limited to, Amazon.
Rubinson is a traditional "hard lines" retail analyst who recently initiated coverage of Amazon with a Sell rating and a 12-month price target of 26. The shares closed Friday at 39.09.
I'm not celebrating Rubinson's analytical conclusions, but I am happy to see that we are actually moving onto the next generation of the Web, where the Internet is treated as a channel and not an industry. Amazon has been an incredible innovator and brilliant employer of technology, but it is not a technology company. "And that is not an insult," Rubinson told Barron's in a telephone interview.
In fact, Amazon is, and always has been, a retailer, and a darn good one at that. I have been beating that drum for years, but my message had been interpreted by some as one against the company, its management or the intermittent upward trajectory of its shares.
Sure, I had quibbles with certain of its disclosures of information, wishy-washy changes in business models and periodic lapses of intellectual honesty. In general, I simply thought that the e-commerce pioneer enjoyed too much of a free ride from Wall Street and the popular press, compared with its brick-and-mortar brethren.
At times, betting against fundamentals and in favor of management's hubris has proven quite profitable for the "believers." Just ask Legg Mason's Bill Miller, one of the best stock pickers of all time, who has made more money on Amazon stock than just about anybody except its founder and chief executive, Jeff Bezos, and perhaps a few other Amazon insiders.
Following the legendary bubble-era stock run that broke 100 (adjusted for splits) in 1999, Amazon shares plunged after the bust (along with the rest of the pack) to single digits in late 2001. Since then, after reining in costs and improving operational efficiency, the shares have maintained their steady climb back to current levels, which seem a bit hefty when compared with traditional retailers, Rubinson says.
A Fresh Look
To his credit, Rubinson understands the gravity his bearish call brings to the table, making it clear that he does so with "pause" and "trepidation." This is not a cheap ploy to "make headlines," he says, but an intellectual argument that has been a long time in the making. "Betting against a solid franchise with high customer marks is not often our inclination. Some will interpret this report as an assertion that the Amazon model does not work. This is not our claim. The Amazon.com model, is in fact, quite profitable," explains Rubinson, who for 12 years has covered hard-goods outfits such as Best Buy and Home Depot.
But he does "not expect as much growth and (or) operating leverage as the market seems to expect."
Rubinson defines Amazon's primary business as that of a direct merchant. With plants, equipment and inventory accounting for 62% of noncash assets and cash-flow (earnings before interest, taxes, depreciation and amortization) margin of about 9%, the analyst contends that Amazon compares more favorably with traditional retailers, whose average noncash assets are about 74% and whose Ebitda margins are also 9%. On the other hand, technology darling eBay's physical assets account for only 16.3% of noncash assets and it boasts cash-flow margins of 36.4%.
As a retailer, Amazon scores well on price, service, selection and convenience, which means that Amazon is a quality retailer in the eyes of consumers. But Rubinson argues that Amazon is reaching a point in its growth cycle where it needs to choose between growth and profit, not unlike what big-box success stories such as Home Depot, Staples or Best Buy had to do. "Eventually, you always see that inflection point," Rubinson says.
What's more, he contends that less is more. For so long, the company has prided itself on adding partners, selling real estate on its site, and constantly looking for ways to leverage its enviable database of online customers by adding merchandise categories. But Amazon, he notes, is playing a "mass game" in a "niche business."
A key measure in catalog business, which has existed since the 1800s, is "average order value" (AOV), or as they say in the restaurant business, "average ticket size."
Rubinson was somewhat astounded that despite Amazon's being publicly held for several years, the lack of information about its AOV -- the firm doesn't report it -- hasn't much bothered the Street and investors.
And historically, niche categories (for example, gourmet merchandise sold by Williams-Sonoma) have rendered themselves better suited for direct merchandising than "mass" categories, which usually attracted lower gross profit per order.
Most surviving catalog operators boast average order sizes of $100 or more. The Direct Marketing Association reports that medium and large operators, on average, fetch more than $150 per order.
What's Amazon's average ticket size? Nobody can be sure, since the figure isn't published. But Rubinson estimates that its current AOV is about $51, with median orders closer to $31. Target's online business gets about $97 compared with Walmart.com which fetches close to $80 an order -- in each case, two or three times more than in their stores -- Rubinson estimates. The primary reason is that Target and Wal-Mart are more focused in what they offer online.
Amazon gross margins in North America were 26.6% last year, but they include some high-margin revenue the company receives from third-party partners, such as Toys "R" Us and Target. If you back that revenue out, Rubinson contends, gross margins are closer to 23.3% -- or $12.66 an order. That's not a heck of a lot.
Thus, the analyst suggests that Amazon probably needs to prune its low-AOV categories -- which is easier said than done, since loyal customers of those products may protest. Again, because Amazon doesn't release that measurement, he says it is difficult to determine which ones should be cut. But lower-priced items in general are the culprits, he surmises.
Rubinson arrives at his $26 price target three different ways -- using a tax-adjusted discounted-cash-flow method, an enterprise-value model and a 10-year discounted-earnings-per-share model. His forward-looking fiscal-year price-to-earnings ratio is 35.6 times. His primary concern is that after banking tax breaks from previous years of losses, Amazon will start paying Uncle Sam corporate taxes in about 2007.
To be sure, Rubinson has caveats about his own musings. Principally, he wonders if valuation really matters for a stock that has been known to trade alongside the tech tape for so long.
"If our sole concern regarding Amazon were valuation, we may be spitting in the wind," Rubinson notes. But the analyst underscores that he is closely looking at growth and execution as well.
Says Rubinson: "Time will tell whether our math is sound -- but at least our work is based on math."
识破亚马逊的零售商身份
我终于找到了一位所见略同的券商分析师。美银证券(Banc of America Securities)的罗宾森(Aram Rubinson)在最近的研究报告中第一句就是“我们认为，亚马逊(Amazon.com)是零售商”，开篇即深得我心。
五年来终于听到了这句话，真是皇天不负苦心人。但与其说我是一直在等待这句话，还不如说我是在耐心地等待华尔街幡然悔悟，不再给亚马逊等互联网泡沫时代的宠儿以毫无根据的高溢价和特别看待。
罗宾森是传统的零售分析师，最近将亚马逊列入了跟踪股，初始评级为卖出，12个月目标价位26美元。该股上周五收于39.09美元。
我很高兴看到网络时代第二阶段的到来，互联网不再是一个行业，而只是一个渠道。亚马逊是一个值得信赖的投资者，也是一个才华横溢的技术运用者，但它毕竟不是科技公司。“这不是什么不好的评价，“罗宾森在接受《巴伦周刊》(Barron's)电话采访时表示。
事实上，亚马逊就是一只零售类股，而且是非常好的零售类股。我已为此鼓吹了很多年了，但一些人曲解为我是不看好亚马逊，不看好其管理层和其股票。
当然，我对亚马逊的一些信息披露、商业模式缺乏有力的调整等也有微词。总的来说，我认为，这个电子商务的先行者相比传统零售商，博得了华尔街和媒体的太多青睐。
Legg Mason的米勒(Bill Miller)，这个最好的选股专业人士在亚马逊股票上赚的钱可能仅次于亚马逊创立人兼首席执行长伯佐斯(Jeff Bezos)和几个亚马逊内部人士。
在经过互联网泡沫时期的传奇上扬并于1999年突破100美元（经分股调整）后，亚马逊的股票和其他互联网股票一起高台跳水，2001年年末低至个位数。自那以来，通过控制成本和提高经营效率，亚马逊的股票又恢复了持续的攀升，罗宾森认为，该股目前的价位相比传统零售类股已很贵了。
“一些人或许会认为这份报告主张的是亚马逊模式行不通。这不是我们的本意。亚马逊模式实际上非常有利可图，”罗宾森解释说。他跟踪Best Buy和Home Depot等零售公司已有12年。
但罗宾森认为“该股并不具备像市场预期那样的增长和经营潜力”。
罗宾森将亚马逊的主营业务定义为直销商。鉴于亚马逊的工厂、设备和库存占据了非现金资产的62%，现金流（即利息、税项、折旧、摊销前收益，简称Ebitda）利润率大约为9%，罗宾森认为，亚马逊的状况优于传统零售商，后者的非现金资产比率平均为74%，Ebitda利润率也是9%。科技热股eBay的有形资产占非现金资产的16.3%，现金流利润率为36.4%。
作为一个零售商，亚马逊在价格、服务、商品选择和便利性上均有优势，这意味著在顾客眼里亚马逊是一个出色的零售商。但罗宾森认为，亚马逊正在接近成长周期中的一个点，需要在成长和利润间作出选择。“慢慢地，总是会出现拐点，”罗宾森表示。
邮购目录业务的一项重要指标是19世纪以来沿用的平均订单额(AOV)。
当罗宾森发现亚马逊尽管上市已有数年，AOV信息一直没有披露时，他是有些讶异的，虽然华尔街和投资者对此似乎并不为意。
一般来讲，细分市场比大众市场更适合直销模式，大众市场的AOV毛利率通常较低。
大多数邮购目录公司的AOV为100美元或更多。美国直销协会(The Direct Marketing Association)公布业内大中型公司的AOV超过150美元。
亚马逊的AOV是多少呢？没人确切知道，因为这个数据并没有公开。但罗宾森的估计是51美元，中值接近31美元。Target的网上业务AOV为97美元左右，而沃尔玛网站(Walmart.com)接近80美元，分别都是他们零售店铺AOV的2至3倍，罗宾森估计。
亚马逊北美的毛利润率去年为26.6%，但包括了来自第三方的一些高利润率收入，如玩具反斗城(Toys ''R'' Us Inc., TOY)和Target。如果把这部分收入除去，罗宾森认为，毛利润率接近23.3%或AOV为12.66美元。这并不算多。
因此，这位分析师认为，亚马逊可能需要砍掉AOV低的业务，不过这知易行难，因为这些产品的忠实客户会反对。而且，因为亚马逊不发布AOV数据，他认为，也难以确定哪些业务应该砍掉。但定价较低的业务通常都是问题所在。
罗宾森计算得出的亚马逊股票预期本益比为35.6倍。他的主要担忧是由于前几年亏损获得的税收减免可能从2007年左右开始将取消。
