Looking Back at a Bearish Call on Amazon
Twenty years ago, how could Barron’s or anyone else know what would become of an internet bookseller?
Bloomberg, May 31, 2019
Every now and again, we need reminders of the things we think we know, and the things we can never have any idea about.
One of the greatest examples of this is a brilliant Barron’s column in the height of the dotcom insanity. Amazon.bomb, published 20 years ago literally today on May 31, 1999, presciently warned column that Amazon was wildly over valued, even after it got cut in half.
That turned out to be great timing: Amazon’s stock would fall 95% from that column until to 2002 lows:
But here’s the thing: the short term bearish concerns could not have foreseen what would happen:
How much has changed since then?
Start with Amazon’s annual revenues. The numbers today seem almost shocking compared to 1998, when the company “posted a loss of $125 million on revenues of $610 million.” 20 years later, Amazon’s 2018 daily revenues are greater than 1998’s annual revenues. Last year, the company sold 241.5 billion dollars worth of goods and services. That’s $660.27 million per day –50 million more dollars per day than the company sold for all of 1998. Even inflation-adjusted, the 1998 revenues are still less than a billion dollars ($939.7m) for the entire year. That’s less than a day and half of sales today.
And then there’s the market capitalization of Amazon before that 95 percent collapse. We would all love to go back in time to buy AMZN at that $19-billion dollar valuation. it turned into $894.2B, a 47X return. My back of the envelope calculations are the total gains since the Amazon.bomb column are about 4,606%, and an annualized average return of 21.1% – about quadruple what the S&P500 (with dividends) compounded – 202% total or 5.67% annualized – over the same period of time.
The world’s greatest stock picker? Bet you sold Apple and Google a long time ago. (October 4, 2014)
Nobody Knows Nuthin’ (May 5, 2016)
Michael Batnick: Looking For The Next Amazon (January 4, 2017)
Amazon.bomb, Barrons May 31, 1999