I don't know why you are being downvoted. At some point you have to generate cash to justify your valuation. However if you look at amazon they have never generated cash relative to their valuation and its been like 20 something years.
It has returned 10x in the last 10 years so I don't think their investors are complaining.
If you look at google, facebook, and apple they are generating cash that would justify their valuations.
Amazon has had positive free cash flow every year since 2001.
Netflix has had free cash flow of -$53 million, -$840 million, -$1.6 billion, and -$2 billion in the last 4 years respectively, and their debt has grown to $5 billion.
Exactly, Amazon also has lot of assets. They have logistics networks across multiple countries, warehouses, data centers, etc. May not be commensurate to their market cap but it does give them a solid moat.
Netflix has assets too. They own a whole bunch of original shows and movies. For comparison, The Big Bang Theory has been worth a couple billion to CBS just in syndication.
They also have a worldwide CDN capable of delivering high definition video around the world.
And lastly, they have 20 years of movie viewing history. Their prediction models alone are probably worth many billions to the movie studios.
Netflix doesn't even own a studio, they pay others to produce their content.
They don't syndicate their shows, they don't sell much merchandise, and they don't sell their "prediction models" or user data.
Don't get me wrong, Netflix does a lot of things right but the way they manage their entertainment divisions is extremely odd. We have over a 100 years of lessons from Hollywood and paying others to produce your content will always be more expensive than making your own.
Their original shows and movies depreciate far faster than most other assets and do so much more unpredictably than most assets. That 39M non-cash charge was almost certainly because of an unexpected depreciation of House of Cards post Kevin Spacey.
That's how people justify investing in Amazon. But I don't know how they think Amazon can just stop reinvesting one day and make money. Every business line Amazon has is hyper competitive. Can Amazon actually raise prices in any of their businesses?
>> Every business line Amazon has is hyper competitive. Can Amazon actually raise prices in any of their businesses?
They have been for some time. Prime memberships, AWS pricing, etc. The lines are "competitive" but Amazon is so far ahead in most that it doesn't matter.
Aren’t their costs going up at least 25-30% because of Meltdown/Spectre mitigation performance penalties? Would they weather another 10-20% price hike on top of that?
25-30% is pretty pessimistic. Maybe on certain services, like a Redis box. On others, like your average web service, it probably won't move the needle much.
I'd ballpark around 5%. And that's for people who weren't overprovisioned in the first place, which is most people.
It has returned 10x in the last 10 years so I don't think their investors are complaining.
If you look at google, facebook, and apple they are generating cash that would justify their valuations.