Welcome everyone. Back to the Joseph Carlson show
on this episode. We have a special episode
because we're joined by a very prominent Amazon shareholder on
Twitter, and I'll go ahead and I'm displaying on the screen
right now. Your Twitter account, your
account name is bull and it's stay.
The tag is Amazon, holder one, and you have three thousand two
hundred followers. I'm assuming most of them are
following you because of your, your takes in your thoughts on
Amazon. You're constantly posting stuff
about Amazon, so I have a lot of questions for you and I think
it'll be fun to go through these.
First of all, the, what do you say that's accurate?
Like most of what you're doing on Twitter, you kind of share
your thoughts on Amazon, or is there any other goal with it?
No. Absolutely, I got on Twitter
around November, I would say, I just was fed up with Amazon
management. You know, I've, I've been in the
stock for years and ever since covid, began management has just
been pitiful at allocating capital and I got on in November
and it originally started as just me and a few friends and we
tag Andy, Jesse and tell him what we were thinking and
eventually they did almost everything I say.
That back when I started, I wanted them to split the stock.
I wanted them to do a buyback. I wanted them to reduce capex, a
million different things, and I had read that Andy jassy reads
all the emails from customers that are angry.
I don't know, if you read all of them, sure there's a million of.
Yeah but I read that he actually sits down and listens to
customer concerns. And so I said okay well let me
go on Twitter and let me tag this guy and give him my opinion
on a few things I would change. Change.
Yeah, I'm so you've been in this, you've been in a stock for
years, it seems like I'll show on the screen here, just the
past five years of performance. Sure.
It this stock seems like one that goes through a period of
just under performance, just total stagnation.
And then it's had a couple good bouts of, you know, have a good
run from 2018 or 2017, 2018. It was up like 90% but then it
stayed flat for over a year had another little run 70.
Percent up, that was pretty good.
But now it's been flat for, like two years.
So that's kind of crazy to me. Seeing, how much the company has
moved over that time and you're trying to highlight the reason
that that is. Yeah, I mean, look, yesterday I
posted a chart of Apple versus Amazon from when the pandemic
hit, and if you go to, I think it was like May or June or
something like that, Apple's up 100% And Amazon's at a zero
percent return, right? And everyone said, oh, Amazon's
the big winner of covid. Well, Apple picked up a trillion
plus dollars in market cap since then, and we've added zero.
And I think it's just the market telling Amazon.
We're really tired of your endless capex cycle.
If you step back and be objective, Amazon has really not
done much in almost five years. Look at where it peaked in 2018
and look at where we are now. And I know, As in Amazon for the
million growth drivers it has and yes it has growth drivers
that none of these other fan companies have but at the same
time you run the risk of becoming a GE when you're doing
too many things at once, right. And none of them are, you know,
paying dividends so to speak at this point, they're all
tremendous ideas, but they take so much capital and look,
Amazon's not a Growth Company anymore.
It's in this category. Mega caps that are all over like
1.5 trillion with Google and Facebook and apple and
Microsoft. And those companies have these
massive shareholder return programs, right?
A couple of them have dividends. They have these like, 60 plus
billion-dollar BuyBacks and Amazon is just acting like a
little growth startup, and that's fine.
But you can't do that with the class of investor that Amazon
now has because the people in Amazon today, Today, they're
not, they're expecting 10x gains from here.
They're there for stability and it just doesn't offer it today.
Yeah, the thing trades volatile. It's a very volatile stock,
especially for the size that it is like, we're, you know, Amazon
looks like it will trade hundreds of billions of dollars
in market cap in like an hour, which is crazy penny stock, but
it's a one and a half trillion dollar company.
Absolutely. So, I mean, you have a I want to
set some Foundation here because I know a lot of people that are
watching, this are going to be familiar with you.
You have a, your you have a lot of concerns about Amazon that
are very vocal of. But obviously you're very
bullish on the company overall because you have a lot of
exposure to it. I don't know if Sauron give
like, you know, I don't know what you're willing to or
comfortable to give in terms of exposure.
But you're, you know, is there any gauge of kind of how
Overexposed to Amazon you are based out of like a, yes, 6%
waiting Index, right? Is kind of the best.
Benchmark. Yeah, absolutely.
I would say I'm not as bullish as Bill Miller, who's 50% of his
net worth is Amazon but I do have probably I would say,
around 20 percent of my net worth and Amazon leaps actually
which I've been rolling over and over for years and so minor out
to 2020 for right now and come this August September when the
2025 is come out. I'll roll out again but yeah
it's getting painful here. Waiting waiting a long time on
it. Okay.
All right, so you're very bullish on it.
I'm will get into that in just a minute.
I want to know in terms of a lot of Amazon investors are, you
know, the earnings are right around the corner, but I want to
know your thoughts on Amazon's earnings in comparison to the
rest of big Tech. Like maybe we start overall,
which is kind of what you expect for this week in terms of all a
big Tech and then and then boil it down to just Amazon.
Sure. Well, I mean tomorrow you have
Google and Microsoft reporting. I expect Microsoft to have
another great quarter, but look at the chart, you know, the
chart is a huge Head and Shoulders pattern which is not
bullish at all. Now it could be a false and the
stock could break higher, but I'll be honest, it none of these
charts and big Tech look bullish at all.
So I don't know. Microsoft is going to have great
numbers. I've seen some analyst reports
that you know, as or is having a gentle deceleration.
But there's there's no such Thing as a gentle deceleration.
Because once you start decelerating, you're
decelerating until you're not and the markets not going to
treat you. Well Google has the same issue
they posted the chart last week from.
Yep. It which is like a third party
analytics service. And yep, it shows that this
quarter AWS this quarter, meaning the first quarter, AWS
outgrew gcp which would be. I mean that would be
catastrophic in terms of gcp being a growth driver for go.
Google because I mean, gcp is a fraction of the size of AWS and
it shouldn't be growing at a slower Pace, but their sample
size was only around 5 billion dollars so you can take it with
a grain of salt. But yeah, it might not be
indicated, but actually, it may my thoughts.
It makes sense. That even though Google cloud is
smaller, it might take like they might actually grow slower
because of just the cost of acquisition catching up when the
default choice for everybody. Going to cloud is going to
Amazon or a, you know, a sure it's going to be one of them do
so lutely and gcp, raise prices in the first quarter.
That's a big No-No and in the world of cloud, so I don't know.
We'll have to see, but look, two days after I posted that chart.
Google had fallen another 10%. So I don't know other funds saw
that and we'll have to see what Google does tomorrow.
It is my second largest position.
I'm not, I'm not a Google hater or anything.
I'm just saying in the short term, it looks like it might
have have some headwinds. Yeah, I'm, you know, Google is
my, it's my second biggest position as well.
And I'm bullish on Google. I kind of for different reasons.
I think the cloud is a big component of it, but, you know,
they have Monopoly in so many other businesses YouTube.
Obviously, I'm a little bit biased, but I think it's,
there's not a platform. I don't think for con which by
the way is smaller than Amazon ads, as of last quarter.
That's something I've tried to highlight two people.
Is that I hear often, like people say I want to buy Google
because YouTube so big and it's growing so fast and it's just
because you interact with it, but a lot of people aren't even
aware, they're not even aware that Amazon advertisers on
amazon.com that they heard that advertise.
It's an advertising platform. And then you're like, oh yeah.
I guess I see those little like sponsored listings.
I'm like yeah, that's a bigger. Those little sponsored listings
are like a bigger company than YouTube.
Yeah, absolutely. And it's not just those like
people think it's just those but Amazon Using encompasses so much
more. You know they have their IMDb TV
which is like rebranding to Amazon free V this week.
I'm not a fan of the name but that's what its rebranding to
and it's this huge like free platform kind of like Roku.
You could just download the app and it's got, you know, tons of
movies and shows and I obviously it's not the greatest content
like Netflix but it's completely free.
And now that Amazon close that mzm deal, they're moving so much
content to it. There's actually some decent.
Content on there. You know, I'm, I'm a little
older than you are. And, you know, some of these
movies like Tommy Boy and office space, and that kind of stuff I
do enjoy that kind of stuff, right?
Right there. Great.
And I think they wanted to just have free in the name.
I see what the freebie name. Correct.
Quran. You know.
So I guess they had, they probably had some marketing and
Dad other. It's a big thing to have free
TV. Because look, you talk about
Amazon's advertising, okay? They launched their own
televisions. October November.
And now those televisions are going out into every home and,
you know, Amazon takes a big chunk of advertising on their
fire TVs from other companies as well.
So, you know, they got tons of these firesticks now, they have
their own TVs, you know, their advertising through that through
twitch you note, which has billions of minutes viewed,
every month, you can go on a website like twitch tracker and
track. All the data twitch is, it's a
little mini YouTube, it's it's growing rapidly.
And Amazon just has so many levers to pull in advertising.
Now, they're talking about in-store advertising at Whole
Foods and Amazon forest. There's just so many things
where advertising is going to keep growing and be a creative
to the free cash flow for years. Well, why do you think that this
just gets overshadowed by other parts of the company?
Because it seems like investors are not paying attention to
this. Like the Sensi advertising
business has really like sword and I've heard headlines about
it and stuff. You know the stock price hasn't
moved at all. Like not even budged and I feel
like it must be something else. Overshadowing the advertising
business and all these new developments it is this massive
capex. Like I don't think people really
grasp how massive this capex is, okay.
Like you have people think Tesla's the most Innovative
company in the world, right? Tesla spent 2 billion on R&D
last year. Amazon, spent fifty six billion,
like these numbers are just so big that like people can't.
Raspberry and you talk to people and they think that Amazon's
just this like retailer, but all this Rd goes into so many bets.
Alexa has like something I think 10,000 people on the team
working on it. You know, you think Alexa is
just this little thing in your house and order things from, but
there's 10,000 people working on that thing, and then you've got
Zoosk and then you've got Kuiper and then you've got the walk out
Tech. And now you've got this by with
prime. They just have so much that
they're doing and that's what that's what Concerns me.
It's you're doing too many things at once, you know, maybe
they can pull it off maybe but the market just doesn't care
anymore. The market is just telling them.
Hey guys, can you please make some money already?
Like this is getting, this is getting old.
Yeah, I feel like it's kind of a some people invest in Amazon
because they consider it like a spawning business, like you're
invested in it, and they just keep creating new creating new
things for their shareholders and stuff.
But it is, it is crazy at this point like looking at their free
cash flow euro per year. And the fact that it's swung
into the - and 2021 to a huge extent and it was it was
trending up before then. But and then, I don't even think
the free cash flow prior to 2021 was really reflective of the
company, their ability to generate free cash flow if they
wanted. But yeah, I you know, I have the
same concerns about that. It's they don't seem focused on
shareholders at all. They do, you know, when I, when
I was doing my research on Amazon and just kind of looking
to the company, I think part of my All case for it.
And I don't know if you see it the same way but my bull case
was basically they're not focused on shareholders and I
think they're going to be forced to transition in the caring
about shareholders and doing a lot of the things like like a
like apple, Microsoft and Google, do BuyBacks stock,
splits, generating, profits, and free cash flow.
Because in my opinion, I think they can.
If they, if they tried to Dial Dial things to profitability,
right? Like everything right now is
geared towards. Capex and spending and expansion
and scaling, and I feel like if they dialed it towards
profitability would see a lot lot different numbers.
Absolutely, I mean, you can tell in the last 90 days.
Something's changed inside Amazon's management where
they're almost in a panic that they have to get the stock up.
You know. There there's a big Exodus of
talent from AWS and it's not that AWS is losing market share
anything. It's just Amazon, isn't the
greatest payer but a Of people work there because they want a
piece of the equity. But when Equity does nothing for
two years and these other companies come calling and
they're golfing, you huge bonuses to leave, and you just
sitting there. They might, they might be
getting some Netflix employees and Facebook employees here
soon, right? But no, I'm serious.
In the last 90 days. They've made a series of moves,
you would never see Amazon make right?
First, they split the stock, right, they Panic split it.
They split it at the Lowe's. As if you look, I'll never
forget that day. It was this day like March 10th
or whatever, it was Google and Microsoft were up like 5% and
Amazon, completely lagged. Like it has for the last year,
and after hours, they announced that split like, I feel like
that day. They were like, okay, this is
it, we're never going up again. Unless we do something drastic,
they did it that day. And then they announced the
buyback, which is a token buyback.
I mean, 10 billions just like, probably buying back the stock
based compensation, but they did those two things.
And then if you look throughout the They did things like they
close down to warehouses that they were about to begin
building, right about that? Yep.
Great, they did that, then they closed the unprofitable stores.
The Amazon go stores, the not the Amazon coasters, the Amazon
four-star, the enzyme bookstores.
So they're cutting me unprofitable stuff and then they
did things like they raised employee cash comp 100%, right?
There's probably a ton of employees fed up with the stock
like okay, fine, we'll give them a raise and you can just tell
these are moves that managers like God, we have to get This
stock up. This is this is really starting
to weigh on us. Yeah.
Yeah I think they got a lot of leeway, you know, a couple of
years ago to be able to do Investments and not care about
the stock price and like you said, I think it's becoming a
main focus. Now, you know, in terms of
earnings predictions on Amazon, but a lot of people say stuff
like do you think EPS is going to be wildly - next quarter
because of the ribbon steak? And what we saw last quarter, a
lot of people think that Amazon basically got a pass that
quarter because of the review in state, get through the EPS so
far into the positive that like, you know, whatever the market
Robo, buyers and sellers and stuff like bought the stock off
of it or, you know, investors kind of like Overlook the capex
because EPS is so positive. But a lot of people think that
that is just because of the review and steak.
Do you think that's going to have an effect?
How do you view that? I don't look.
If you go back to last, Order. We pop, like I forgot what it
was, like 15 or 70%. Unlike I think it was like,
record dollar volume. I don't have the, the chart in
front of me but I remember that day being some massive number of
shares and dollar volume is one of their biggest ever if not
like the biggest ever. And what I would say is people
that think about rivi and are just the wrong.
The reason, the stock popped is because AWS accelerated, right?
It grew 40% And meanwhile last quarter as your and GCC both
decelerate it from smaller basis and so we had had this whole
fear for so long that like Google and Microsoft were eating
away at Amazon and Amazon completely, you know, squash
those fears last quarter and that's why the stock popped 40%
because look, retail was plus 1%, 1p was plus 1%.
And in the past that would have killed the stock.
And I actually think this quarter 1 P will be - year over
year, so and I don't think it will matter.
As long as AWS accelerates again.
Yeah, I feel the same way. I think the market can be dumb
sometimes, but I think it's smart enough to, or at least
efficient enough to factor in that ribbons not fundamental.
It's not fundamental to Amazon at all.
Like we have to look at the operating income, this quarter
and Riven Riven will have no effect on that Raven will affect
EPS, right? And EPS is not something that
matters to Amazon, it's about operating income and free cash
flow. And so if they make Heads on
operating income and free cash flow.
They're not going to have a problem, okay?
If that free cash flow and operating income below, what
investors are wanting over and we've got issues.
Yeah then we got some big issues, you know that the the
other concern, excuse me, the other concern is You said that
so you said that you think retail is going to potentially
come in your over your company - this year, correct for one knee.
What is your? Why do you believe that?
I guess, what is your thesis on there?
Well we you can tell it's been decelerating the last couple
quarters, right? We had that huge boom during
covid then it began to slow last quarter's plus 1 percent this
quarter. You have a loss of a lot of
stimulus and I have a lot of big sellers that follow me on
Twitter. I mean, guys, Sell 10, 20, 30
million dollars a year on Amazon and, you know, I chat with them
regularly and a lot of them had slower than expected first
quarter's now, those guys are third-party sellers.
Those aren't first party Sellers and for them though, right?
It is indicated. It is indicated.
But here's the thing, here's the thing.
You look at the recent credit card data from like MasterCard
releases their Master Card spending pulse every month and
then American Express just had their earnings.
The consumer is spending all kinds of money.
I mean, they're spending all kinds of money.
Now, CNBC will tell you it's like 100% on travel and not one
dollar is going to Amazon or anything.
I don't know. We're going to have to see but
the Lost stimulus is pretty big for Amazon, you know there I'm
not gonna say it's like massive. I'm just saying I would say, you
know, 1p might decelerate and be minus 1 percent or something
this quarter. Yeah, you know.
Yeah. I think that's, I think it's a
strong possibility when I look at it.
A lot of the companies that had benefited from covid-19, That I
assumed the benefit would have worn off by now, it's still
taking longer to kind of like, you know, see that transition
and to have them slow down a little bit.
So if Amazon's retail benefited from covid I could see it
slowing down a bit as Amazon gets faster.
With the same day delivery is, I know in my household.
Our orders are up like 200% from two years ago, just because now
we're getting to the point here where you're getting packages in
four or five hours. And so it's completely
eliminating the need Of like me running to the store to buy, you
know, like a box of Tylenol or something, right?
And what it's doing is you have to have a thirty five dollar
minimum to get same day. Delivery it's like forcing me to
buy stuff. I don't necessarily need right
to get it that same day. Yeah I've noticed the same
thing. My deliveries have been the
improvement over the past couple of years has been incredible.
Like a couple of years ago, I was being actually becoming more
frustrated with Amazon because I'm like, why am I paying for
Membership. When there's not that many
primed items like there's it's like one out of every like seven
items is Amazon Prime and I get this lower shipping on them now.
Like everything seems like it's primed and they're showing up.
I'll order him like one you know, like a late evening and
they'll show up the next morning, like oh my gosh, do
they have a center right next to us?
They must have opened a new Warehouse like right down the
street or something, because we're getting packages way
quicker quicker than we did a couple years ago.
Absolutely, that's that's been the whole point of this.
Hapax, you know, Amazon management believes that the
faster people can get things the more they'll order.
And it's just expensive to build up that kind of logistics.
You know, they like I made post on Twitter of the square footage
that Amazon's built out and it's crazy.
But if you look at their distribution centers, like last
year, they added something like 150 million square feet, which
is more distribution than, like, Walmart has and they did it in
one year, right? And they did it the day before,
and they have a A ton of what this fictitional.
Yeah. Yeah.
So yeah. So just incremental additional
well, massive over 100 million square feet and are going to do
it again this year too. And so yeah, there's they're
building out this insane Logistics.
But look last week, they just launched just by, with Prime and
so they're telling you, we were building it for a reason.
Right now. They're going to take Prime
offline and and that's what Jesse said, during a CNBC
interview, two weeks ago, he said 85% of Commerce is still
offline and so Amazon's now trying to get the customers that
aren't using it. And I think it's a big move,
man, because think about how many times you go to another
website and you want to buy something, but you don't want to
make a new account. You don't want to input your
credit card information. All the time, I'm super exactly.
I have dual reasons why I don't do that one is because it's
inconvenient. But the other one is because I
don't I know how difficult it is to return stuff from like third
parties. Exactly.
Absolutely. So I know with Amazon, I'm gonna
be able to return stuff. It's a huge.
Exactly. And so I'm interested on that
note the Amazon expanding expanding their Prime like by
with prime rate. For those of you not familiar,
they added the ability for third-party websites, right?
To have a by with prime button where you can be on a different
website but by with Amazon Prime and it's fulfilled through
Amazon with their with their customer service, right?
Correct. So how does this fit with
Shopify? What do you think like Shopify
investors are? How, what is their bullish kind
of take on this? Do they, you know, it's gonna
it's kind of the end of Shopify and not, not the end of Shopify,
but the end of shopify's potential growth and iíve been a
big hater Shopify for a long time.
I mean, you can go back and see my tweets, but the thing is, the
whole Shopify thesis for years, was that okay?
It saves sellers, a ton of money.
But on the other hand, its customers are doing all the
buying and customers, only care about convenience to them,
right? It's not like, we're not here to
worry about how much we save sellers, right?
We're here. How quickly does my package
come, how easy is it to return? It like you just said all those
things and Amazon is just getting involved in that space.
Now, they did it a day after Shopify made that acquisition
for like deliver. It was there trying to get into
Logistics, but look chef, I can't do it.
They announced this year, their capex is going to be 200 million
this year. You could never build a
logistics Network or anything. They really, I always thought
the end game was going to be Shopify, sellers, fulfill with
Amazon. And that's what this is
basically going to do. It's going to take all those
smaller websites and are going to start fulfilling with Amazon,
because that's what Amazon did, right?
They made everyone a custom to the super fast delivery.
And now, if you get a package in like three days from FedEx,
You're like this, this was eternity.
I'm not doing it again. Yeah.
You know what? No one wants that?
No, no, you forgot. Even what you ordered and how
much you paid for it. How long ago, it was right?
Yeah, with Shopify. I've already heard the bull case
and I was kind of bullish on it like a year ago, to be honest.
But actually sold that one before it's huge downfall
because I was like, I went and listened to like that Twitter
space with. I can't remember his name, the
guy that sells like a million dollars on Shopify or on Amazon
and he runs a Opposite Shopify store and he's like, look, I
can't I can't make any sales on my Shopify story.
Like, even if I run ads people visit the Shopify store, they
look at the products. They want, they'll cross check
it against Amazon and buy from Amazon, you know, and since
Amazon doesn't let you price it lower, if you want to sell them
both they have those exclusive agreements, he can't sell
anything on Shopify and another thing I was thinking about is
Shopify has always pitched itself is as being like the one
that have Feet Amazon, right? Like for the small for the small
businesses and Amazon's is bad company that will steal your
data, still your marketing and put other products right next to
yours. All those concerns if you're
really concerned about being placed next, to competitors
products via concerned about them, taking your data on, like
your listings and all of that, I don't think that this would have
the same concern. Just having a checkout button,
you have your own website at that point.
So I think a lot of the distinction that If I had prior
to, this is just vanished. All right.
Look, the move is big for Amazon because again, they built out
all the square footage and fulfillment capability.
The thing with Amazon, I don't know what you do, or don't know,
i-i've made post about it but basically Amazon charges sellers
for storage by the cubic foot, right?
So like right now, when sellers join us by with prime offline,
they're going to have to ship whatever items.
They want you eat it. You don't have to have all your
items with by with prime, it's actually in beta right now, like
AWS in. Years.
And other people are like testing it right now and so
you're going to have to ship your items to Amazon just like
it's on amazon.com, right? And so you're going to have to
pay storage fees for that, and Amazon is going to house your
stuff. And when a transaction is made,
they're going to ship your stuff out, but Amazon charges you by
the day for storage. So, when you start sending an
inventory right there, collecting read off of you until
it sells. And so it's a, it's a huge new
businessman because you're Talking so much business
offline. Can now add inventory to Amazon
to be there for sale and it's it's a really, really big move.
And no analyst is really modeled it yet because it's almost
impossible to model. What is this worth?
How do you model that? You think you'll be a new big
line item like their ad business where they break it out and you
can look at the growth of it over time.
Yeah. I mean look it's like AWS.
This is how AWS started right out like where did Come from
right Amazon built out this thing that fulfilled their
needs, right. It fulfilled their needs and
then they sold the excess capacity and now you have this
by with prime or Amazon built out, this massive Logistics that
fulfills their needs and now they're selling the excess
capacity. Yeah.
So it's you know, warehouse and Logistics is a service, kind of
they're going to be correct renting.
Yeah, extra space. Well they do that with
everything right there doing that with their like they're
going to be transporting other people's products as well.
Two are like correct, FedEx and USPS.
Absolutely, those are big companies and UPS is like 150
billion dollar market cap. You know, these are big
companies, but here's the thing, UPS and FedEx.
Don't, how's your goods? Amazon's going to take all these
websites in these websites, are going to have to store their
goods, with Amazon to get that by with prime.
Because look by with prime means you're going to get it in like
you know a day, right? So they have to store their
goods with Amazon. That's the big difference is
it's creating, you know? All those fees.
I mean I've posted before the I believe it's something like 80
cents a cubic foot. That's what they charge to store
Goods so you can just think about all these new Goods coming
in and then the fourth quarter triples it's like 240 per foot.
So hundreds of millions of square feet housing all this new
inventory. Interesting.
Yeah I haven't modeled that business out at all like there's
so many parts of it, you know I'm like you know I model like
the AWS and kind of like sure subscriptions and The ads, but
there's three different businesses you can go into.
I think that's why it's such a difficult company to understand
and model. Like it just has like you
mentioned, they just go into so many different things.
Sure, I want to, okay, so let me let me think about this for a
second, I want to go into what, where do you see before we get
into? Kind of like risks and potential
downside, out of all the various things Amazon does.
What do you see is like the biggest value in the company?
Like if we're looking at this from a valuation, Warren Buffett
Benjamin Graham perspective. Like, where is the Deep value in
Amazon? Where's the margin of safety?
Why would you invest an outsize position in it?
Well, I mean, it's all AWS, right?
It's all like Andy Jaffe send his interview two weeks ago,
five percent of it spend is in the cloud today and with that,
look how big these numbers are from AWS, right?
Sixty-two billion. Last year, I think we're going
to be at 85 billion. Liyan this year, I mean what
happens when 50 percent of it spends in the cloud or even 25%,
right? These are some huge numbers and
it's really hard analysts are so wrong on AWS.
Like you look out five years ago, they were modeling 20
percent growth for last year. Obviously they didn't know.
Covid-19 accom accelerate things whatever but analysts have a
hard time because they they always think things have to
regress. The time and that's not
necessarily true version and the celebrating you know, all that
even this year Credit Suisse I posted a chart the other day
they have AWS at 19% growth and Q4 like if a dumb just grows at
19% in Q4, I might sell my steak because that would just be a
massive disappointment. Yeah that's that's a really
quick reversion back to where they write but I think that's
unlikely but yeah no it makes sense I have a buddy that works
for a publicly traded company. That does about two billion
dollars of Revenue per year and they still stay still software.
It's like a tech company and he said that that was about a year
and a half ago, their team, their developers like, they
wanted to stop moving, stop doing their own it spin, and put
it on a cloud provider. And they, they literally run
their company off of Microsoft, right?
They all use Microsoft teams, their whole accounting, team
uses Word and Excel. Cell.
And, you know, the whole Suite of products that Microsoft
offers after they went and talked to their developers and
had all of them run analysis on which companies to go through,
for cloud, they want with AWS, they still despite the fact they
had all like, all these things that could Mike migrate with
Azure, they still chose AWS over it.
Now, I don't know the specific reasons why, but he said their
company went with that and they're like thrilled about it
over the past year and a half, not having to worry about their
own identities. Their it problems, They've been
moving more and more to the cloud, so they're putting their
basically running all over there.
I key on Amazon now and they just signed a three-year
contract. So I think we're going to see
more stuff like this where anytime a big companies wanting
to move more to the cloud and they do analysis on like, which
one has you know, which one has the best infrastructure?
The biggest tool kit, Microsoft might win some of them Google
Cloud. Might incentivize companies to
go with them. I think it's less.
Likely but I think the majority of them are going to continue to
pick AWS. So and I think that's difficult
to model. It is very difficult to model
but more than that you have to just think of like Corporate
America like making that decision to stay on Prem versus
going to AWS. That could be the end of your
career as an executive, right? Like that could be a
career-ending move, if something goes wrong on prep.
And so, moving to AWS, all these companies are giving bonuses for
cost savings. All those things and And it's
just it's safer over there, you know, when your on-prem so much
can be wrong, right? You could completely model the
usage wrong and you're overpaying or whatever when it's
pays you go there, it's perfect, there's no, you're not
overpaying for anything and so you know, it's just really hard
to make a case against why a company should be in the cloud.
Yeah, no. For sure.
So you view AWS is just a key component of this company.
It's the real. That's the thing that attracted
you to Amazon as an investment. Yeah.
Absolutely. I mean I don't own Walmart or
Target or any of these you know retails just something I have to
put up with to own a piece of AWS but I think AWS in the long
run is probably the single best business in the world.
I know a lot will say Google AdWords but AWS is like a giant
utility company. Right.
It's like it's this huge utility company and you have to pay your
bill every month once you're on board and you know it's like
your home. Right, bad times.
Are you just gonna like turn off the electricity?
I mean, no. I mean, AWS, like Powers the
internet, you know, a huge chunk of it at least.
Yeah. You can't, you can't turn it
off. I mean their companies running
on it and besides companies like everything that everybody uses
his running on it on that note. So I think most people would
agree with you that cloud cloud is an amazing business.
But from the outside perspective, a lot of people
look at Amazon is just kind of like first.
You know it's kind of like Netflix.
It's like they got the first mover Advantage there.
It looks very good for them right now because they're the
biggest and they're kind of chugging along but you got you
got the HBO catching up that you know, you got that Microsoft,
you got the Google, you got Oracle, you got Salesforce and
so on and so forth. And now a lot of people view it
as just kind of like commoditize thing where you have all these
competitors. What are your thoughts on that?
I don't see much competition coming because this costs a lot
of money, right? This isn't like a space Regan of
like a start-up, get into the cloud and come at Amazon, or
Google rich. Like these data centers cost a
fortune to build Amazon had a six year Head Start.
When it began with the cloud right before, Microsoft, got on,
right? And the way customers are so
sticky on there, it's going to be really difficult to get
customers to leave. I saw one guy the other day,
tweet at me, that he thinks The future of cloud is going to be
like T-Mobile where Microsoft is going to pay people to switch.
Like I don't think people get with these egress costs are,
there's so massive that like nobody's gonna leave AWS to go
to Google cloud or something, right?
So it's like a land. Grab like, you're out there
every day and Amazon's leaning these just massive deals.
I mean, just look at last year having a huge Deals.
They landed would like the NASDAQ like the one with Dish
Network Dish Network. Work said they're going to be
AWS, has biggest customer in like another year.
These are huge. Huge deals and I think people
overthink things, this isn't a commoditize space.
Come on, Ty space would be advertising like Google AdWords,
right? Like those are losing
efficiency. And here we are, were running
into an economic slowdown are people going to keep paying for
them? I don't know.
There's a lot of fears. That's what the analysts are
modeling. That Google ads are going to
have a slow down. I don't see that for the cloud
right now, we're still in the first inning, so to speak of
cloud. And the companies that are
really getting decimated, like your Netflix and your Facebook,
they're kind of in the ninth inning of what their companies
can do, you know, that's why Facebook spending so much on
metaverse. And yes, Amazon is not there in
Cloud, they're not there. Yeah, and another thing that I
think, indicate of of how difficult it is to be, there is
Google, Google is doing everything they can to gain
customers. They're not just getting them
organically like Microsoft. And Microsoft gives them because
they already have a connection with so many businesses.
They can incentivize them to migrate Amazon just because it's
like the default choice, but I feel like Google, they have to
like go, go an extra level to incentivize companies to use
them and so, their customer acquisition cost, I think is
much higher than It's yeah, absolutely.
I mean, look at the same time frame, where Google is today AWS
was wildly profitable, so group was a little behind and I think
that's why they panicked and they raise prices and q1 will
have to see how that works out. I don't know, but I know you
can't raise prices when Amazon cut prices, 111 times or
whatever, since AWS began. Yeah, yeah, it's crazy.
It's okay, so AWS by far I You know, I think most people agree
that's like, the best part of the business outside of that.
What are you most bullish on? What are you?
What's the biggest, what's the best part going on?
Well, you know, obviously advertising is is probably even
more profitable than AWS going forward.
It probably is but for me I think it's the just walk out
technology that they're just starting to deploy.
I for me, that kind of has Limitless licensing potential,
right? Because it's Look at retail
stores all over the place and Amazon's got 35 of these
actually up and running right now and I've used it many times.
It's incredible is on a lot of people are like, oh, you know,
there's no cash shares, but but I went to Sam's Club and they
have self-checkout, right? So you're talking about,
Amazon's go check your list store, like there's no treasure
at all. What you're talking about was
Sam's is you gotta scan every Item right?
Okay. Yes, you got to do that with
Amazon. They've launched this.
Just walk out technology and they've had it deployed like 45
years. Now for they first started with
their Amazon go stores, which is like a little convenience
stores, right? And then now, they're doing it
in these huge like grocery stores.
They launched a brand called Amazon Fresh, which is like a
lower-end like Kroger level grocery store, right?
Like they have Whole Foods, the high-end brand and now they've
got this like low-end brand. And what it's doing is you look
at Zhan in the u.s.a., got like 160 million users, right.
But the lower-income users aren't very big on Prime and so
now they're, they're going at those users with these grocery
stores, and so these grocery stores have no cashiers.
You just you walk in you, put your groceries in the cart and
you leak, right? It's like the most fascinating
things, but you've got to have an Amazon account.
And so they're slowly starting to license this stuff out.
They've got them in a couple stadiums, right?
They don't, they're not even branded as Amazon.
Like they have them at the Seattle Arena, where the hockey
team plays. They've got him in Boston where
the Celtics play last week, in Houston, they open two of them
or the Astros play. How do you like what do you do?
I have never been to one of these don't have any around me.
Does there's a ton of it was on YouTube, by the way.
Okay. So I just need to walk.
I think this will be a transition for people to catch
on to it, right? Like kind of a learning curve.
Actually it's not even learning curve.
You literally you go to an Amazon Fresh store.
They up there. Actually opening about one a
week right now for the last like month and a half, okay, you just
you get there, they have someone at the front that explains you
what you do. You just open your Amazon app on
the phone, right? Pretty straightforward.
You scan it on the dash card, the dash cards like this, highly
sophisticated grocery cart and like, literally, as you're
picking things up in the store and putting them in your basket,
it's like automatically building this virtual cart.
And then at the end you just walk out and it builds you for
what you took. No, that seems pretty
straightforward. And Amazon.
No, Amazon has said they've lowered.
The cost of running a grocery store from 4 million to 159,000
how massive of a savings is that.
Yeah, you're so that's talking about not having as many
employees around. Did you check her out stuff?
Correct. It's reading it.
So they're trying to turn traditionally, a low margin
business into a slightly like a higher margin business.
Then it's not just groceries. Don't like this stuff, has
applications every right. Like I was saying like, the
Hudson non-stop stores in are It's a bunch of them are
starting to use it and so that's like magazines and drinks at
airports, whatever. Like I said at the sports
Arenas, they're doing it to and, you know, you can go buy
merchandise, you do everything anything retail related, right.
If you want to minimize slippage, you want to minimize
theft, you want to reduce, payroll costs, whatever.
This type of tech is like it's incredible and you have to have
an Amazon Prime membership, even if, you know, this Tech at a non
or the grocery Three stores not for the non Amazon business.
Okay. Okay, like in Vegas in Vegas.
They have at the new Resorts World.
They have a gift shop there and you just put your credit card in
the door and you just walk in. Okay, make sense.
Yeah, I get that's not covered much like I don't see analysts
looking at that or anybody looking at that Tech at all.
It's just kind of like people. This is you as a silly side
project for Amazon. Amazon can't discuss it, right?
Like Amazon's like the most hated company on earth, right by
politicians. It was on comes out and says,
hey, we have this incredible Tech and we're going to wipe out
cashier jobs over the next 10 years right now, you would have
you would have Bernie Sanders, like, screaming from the roof
about what, you know, we got 2nd Amazon like today, so, like
everything else image on it. Just stays quiet, right?
But these Amazon, Fresh stores are popping up all over the
place. And there's a ton of videos on
YouTube. I mean, you can check them out
but it's tremendous what they're doing and When it extrapolates
into other segments of the retail industry.
I mean, the potential is just massive for licensing.
Yeah. No I think I mean if that's the
way it's going to be like, if you look out ten years, we're
not going to have a ton of people, it's already
progressing. That way, step by step, it makes
sense. We went from having cashiers.
Do everything can having said self checkout, the next step is
to have no check out and to have ai and and cameras and stuff do
that. So to me, it's going to happen.
I think Amazon sees that and they're just going to say, well,
we're going to be the ones to do it.
Yeah. And I mean, look, they don't
disclose what they charge these other venues for using it, but
if Amazon is telling you, they're themselves are saving
like 3.8 million dollars, running a grocery store.
I mean, what's it worth to a business?
I mean, would Kroger pay 20,000 a month for it per location.
I mean, I would, if I ran that kind of business.
Yeah, if it's that much. Absolutely.
All right, well, what other before I move on to two risks,
what are there? Like, you know, they have so
many long shot bets. Like what are your thoughts on
Zoosk? For instance, I think Zoosk has,
you know, it's funny a week ago. Tesla had its earnings and Elon
Musk announced. Hey, we're going to have a car
with no pedals and it can go in both directions and everyone was
like, oh my God! Elon Musk is the smartest guy in
history and I pointed out. Out that like, you know, zooks
has been doing this for like years and even like Zoosk like
like my comment on Twitter, they came and they liked it and they
were laughing. And it's the truth.
I mean, Amazon's further ahead there than Tesla, right?
Well, do this is like testing in Vegas, it's live and die so I
don't hold Tesla right now individually.
But, but let me argue for that on Tesla, shareholder behalf
because I know exactly what they say, they say it's easy to come
up, you know, just like V's many, many companies.
Come With Concepts and ideas and they might even come up with a
good like beta, but it's all about the scale, the
manufacturing power. And so that's where that's where
Tesla's in the lead is if they actually create one like a Zoosk
style car, they can manufacture it.
When Angela. Look, here's my thing.
Elon Musk is brilliant, right Tesla's?
They're neat cars, whatever but go back.
All right. We had the Tesla semi announced
I think in, like 2017 still doesn't exist, right?
He you have the Tesla Roadster. People paid a quarter million
dollars paid in full. I want to say in 2018 still
doesn't exist. The Cyber truck announced in
2019 still doesn't exist and so Tesla can do all these things.
Sure. But it's going to have to go
through a massive capex cycle like Amazon did because they
just don't have the manufacturing capability today
to build all these things like they have all these great ideas
if they're so far away from actually like executing on them.
He know if Look at Tesla right now.
AWS does more revenue and profit than Tesla.
Yeah right. Thanks to Amazon is mostly
because I just the numbers I feel like they have like I get
all these guys on my Twitter like oh, you know you're a test
later. I'm like I'm not a test later
guys, I'm just a rational person.
Like, yes, Tesla can do all these amazing things over the
next decade. But for right now, for right
now, it's really just not that big of a company for the
valuation. In you're paying and so like,
you know, Amazon was once way ahead of its stock price, right?
Go to covid 2020. We got to 3500.
We've done nothing for two years.
Yeah. So so this have yourself.
Exactly. So that kind of stuff happens.
It's not a big deal. I'm not saying Tesla's going to
be bankrupt or anything. Just the stock is way ahead of
where it should be, and it's pricing in a lot of future.
Yeah, no, I I agree. I my big thing there.
It's just I agree. That's a great company.
Good future about the valuation is as tough for me to wrap my
head around now. Okay so let's move on to we got
earnings coming up. Do you consider this like a
vital earnings? Like is this going to change
your your thesis on on Amazon? It's not going to change my
thesis but it is a vital earnings because look we're this
is going to be any jassi's, fourth earnings call, right as
CEO. And he's never even been on one
of these calls which is like, it's one thing to just
Frustrates me with them. And one of the reasons I got on
Twitter it's like you can keep you know, spending more and more
capex and then we guide down every quarter.
It's like what are we spending all this tap x 4 like, can can
someone give us an answer? Like you just tell us.
You keep waiting and it's going to pay off.
But here we are two years. No movement revenues keep going
higher ebitda keeps going on. Every metric is getting better,
but the stock does nothing in the markets losing confidence
and all your It's so I'd like to hear from Andy, like, I'd like
him to sit there and take you no questions from analysts, because
you look at Facebook, you look at Google Microsoft, the CEOs
are all there on calls. And so, I think it's a weird
thing that Andy doesn't do that, but I will say, especially, when
the stocks flat, I could see if the stock was up 100%.
He's like, I don't know. You know, who carries?
I don't need to be there. Everybody else to shareholders
are happy when it's flat. It's like you gotta come and
explain yourself, you know? Exactly.
I just I think for me, The
things I'll be looking for this quarter.
Our did AWS accelerate. I think it did.
I'd like to see past the 40 percent?
No, no, but accelerated from q1, 2020, II, mean from q1 2021.
I would say it's going to be in that 38 to 40 percent range,
okay? Over 40% I would be like stunned
if it went it was like 42% or something.
I would be blown away. But no, I think it's going to be
like the 38 to 40 percent range. Okay.
Like to hear that were slowing down the retail capex, you know,
the last call they said like two analysts, press them, one
analyst press them, and they completely ignored him and then
like the next animals followed up with the same question.
So you could tell like the investor relations guy got kind
of pissed off and so he answered them.
And he said basically when you break down the capex, 40% is for
AWS. And then he said a big chunk is
for a mzl which is their transport Network.
And then he said the retail capex, It would fall in line
with retail growth. So if retail is going to slow,
does that mean retail capex is going to completely slow to.
And if so, I mean, that's what I'm looking for.
I'm Looking For Less spending on the retail business.
That that business is like an albatross, right?
It's like, I know there's a million things and we're
expanding by with Prime and all these things, but like, I just
don't care. He like I just like, focus on
AWS. Let's let you know what's up to
buy backs and look let's just do with what stocks.
Close to do, you know, like, you know, more this like give return
money to shareholders at some point.
Exactly, you know, and look, none of the big shareholders are
there for this retail business. That's what makes this so
painful. It's like you're watching all
this capex. Go to this retail business even
AWS Engineers right there working on like the world's
greatest project right now and they're stuck with their
compensation tied to this crappy retail business.
Yeah yeah. Well if you even broke down the
The like Amazon AWS would be looked at so differently because
if you look at the growth of Amazon overall the slow huge
massive Revenue growth from retail show that the whole
company's not really growing at a quick Pace.
We look at AWS in its growing 40%.
It's growing double the speed of Microsoft.
So if you broke the company's apart they would have completely
different valuations on them. Like well what do you think that
what do you think that market caps would be if you broke AWS
off from the rest of the business?
This like, out of the, what do you think?
They divide would be if he WS was a separate business, it
would be worth more than Tesla, just because it does more
Revenue. It does more profit, and I know
Tesla blows won't agree, but I think AWS has a bigger and
brighter future than Tesla. You know, Tess is going to face
competition from a million car makers and Amazon's just not
they have to deal with Microsoft and Google and that's about it.
So you know going forward I could see ten years from now
where a WS is doing half a trillion in Revenue by itself
and so if Tesla's one point, one trillion, I think AWS would be
higher, but I think analysts, look at Amazon the wrong way.
Like you'll hear on Tuesday. Oh, Amazon's revenue was down.
That's because of the 1p retail being like half, right?
If you look for me, the most important number is Services.
Okay, Services means your 3p business, plus your
subscriptions, Plus Aw, S Plus advertising, okay, and last
year, last year Services were two hundred thirty 1 billion by
themself, that's bigger than Microsoft.
Okay? And that grew That Grew
something like thirty three percent year-over-year.
That's huge growth in the segments that matter, right?
So I don't look at the overall retail number because half of it
is just this low-margin retail stuff.
So I'm not concerned with that. The service is number is the one
that it matters to me. Okay.
And what do you think is the biggest risk coming into this
quarter and going forward with Amazon?
What are the things like? You know, what Karambit effects
on a ramp capex again because what do you think helped flicked
it. It's not something bad another.
You're either, you know, usually when people look at stocks, I
think the biggest risk is something another company can do
to it now. With Amazon, you're saying it
says self-inflicted wound. Yeah, I mean what happens if
they say okay well you know, Amazon Fresh is working now we
want to be Thousand grocery stores.
Like, like what happens? If they say, okay, we want to go
after Kroger, you know, we, I'm like that's what would kill me
because it's like, yes, walk out.
Tech is a huge deal, but at the same time, I don't want to get
in the grocery business, you know, like I just, I want you to
license this stuff out, right. But I don't want you to
physically go build all these grocery stores.
Yeah, well, Microsoft is good at that, they kind of stay away
from the low-margin stuff. They're like exactly.
They keep very, you know, they have some connection to it but
right, not a lot. Lat, I think Amazon, like I said
earlier, my biggest risk to them is they get into too many
things, they are just doing too many things and they all sound
great and I'm sure many of them will work out but they just need
to focus. They just need to focus it like
I don't know if you remember GE right there.
Was there was like a joke back in the day that like, you can't
describe what GE does in one sentence.
And that's kind of where Amazon's, you know, you're
getting that point with Amazon where You just can't describe
what they do because they do eat million things.
You want? Analyst joke that Amazon's Tam
is global GDP. I mean that's like literally
because like they just do everything.
Yeah. They really do know.
It's yeah it's a double-edged sword.
Like it's good that they have lots of verticals that they can
grow into but at a certain point they gotta prove to shareholders
that it's worth it, you know? So that's kind of the same way
that I view it. I think the Amazons I feel Like
the earnings should be reflective of what AWS is doing
the ads Biz business, and probably some macro stuff going
on right now in terms of valuation, I have Amazon right
now, when I do like a sum of the parts valuation, I think I sent
it over to you, I have it somewhere around like, like 4800
is what, what I think it's worth like on a pretty and that's not
like pie in the sky. Like I'm giving everything super
high multiples and expecting everything to be above.
Tations. That's just what I do.
Like a conservative valuation compared to everything else in
the market. So what are your thoughts on
like, just like a real valuation in terms of some of the parts or
breaking down the different parts of Amazon?
Have you looked at that? I absolutely have.
Absolutely, and I said on Twitter, I I put my valuation at
5500. I think somewhere between two
and a half inch three trillion. I think Amazon should be worth
more than Apple right. Apple right now, is 1.2 trillion
more which Is like, I mean, that's insane to me.
I mean, that's just insane. I mean apples, a tremendous
company, but in terms of growth, I mean, they're nowhere near
what Amazon is and what it can be right, you think Amazon
should be the biggest company in market cap in the world right
now. It should be it absolutely.
Look me in this stuff like Logistics and in AWS.
What I mean they have built out so much it's like at this
valuation 1.4 trillion. You're just really like valuing
Amazon that like nothing right now. 80 billion over the last
two years on capex. I mean, they're building so much
stuff. They have so much stuff in the
pipeline. The market is just putting them
on ignore until they show us some free cash flow.
But if I was to say, you know, I saw your numbers.
I think 550 500 is probably around the number.
I would say just because it's hard to look at Amazon and look
at today's share count and think it's going to be in the same
place like two years from now, right?
When you get to this size, you have to start buying back stock.
There's nothing left, right? Biggest thing that I think is
helping apple right now is right.
Can cook just sits there and hits the by back button.
Every every second of every day, anytime Shirin sells the stock,
Apple has the cash flow to just buy it back and then million of
quarters, you know, so they're in all the dividend funds as
well as a growing dividend company.
Like they just have good will with everyone right now like
they're just created Goodwill with every class of investor.
Look, I think Amazon did that split.
They did that 12:40 split specifically because they want
to Dow Jones. Invite same with Google, right,
the Dow Jones. People don't know this, it's
price waited, okay. And what that means is you look
at the Dow Jones, like UnitedHealth is like the biggest
component because of its price, right?
Its way up, five, six hundred bucks, whatever it is.
I don't even, I honestly don't even follow the Dow Jones at
all. And so, Amazon and Google
couldn't get in the Dow Jones at 3,000 to share.
Because, you know, they would have to be like twenty percent
at the Dow Jones and they don't want that.
So I think they both split to that like 150 range actually
lower now because they want the Dow Jones to invite them.
And I really do think later this year, they're going to get that
Dow Jones invite. And I think it's going to give
you like a different class of shareholder, right?
Like right now, right now, Amazon's in all the growth
funds, okay? It's in there with your Netflix,
your Shopify, whatever. And so, when those names get
killed and those funds start seeing redemptions, they got to
sell their Amazon as well. You know, they have to start
trimming and trimming and so we're a growth stock where we're
tied with those and I think Amazon Google realize that like
Microsoft and Apple have more stability paying a dividend
being in the Dow Jones. It's different class of
shareholder and I think they both want that.
Well yeah. Yeah, no, I agree 100%.
Well hopefully, you know, we'll see.
Maybe we'll have you on again and see how things turn out this
this week. I hope it goes.
Well, man. I mean, I really cannot imagine.
I mean from a valuation standpoint.
We really cannot go much lower. I mean, at one point four
trillion today that's a laughable valuation for what
Amazon is. Yeah, you just need, you just
need a call where they quit telling us to keep.
The two quarters down the road right now.
Like we're in a market now where people are concerned, what's
going to happen? Six months from now.
Nobody cares about that. That's why every girl's name is
killed. They want to see what you're
doing right now. So I'd like to see Amazon tell
us the capex is slowing. Maybe maybe they get two free,
cash flow a quarter sooner. You know, most people think it's
going to be Q3 but maybe they can get it to Q2.
I don't know. But this is a huge call for them
and I would be incredibly disappointed if it went the
wrong way. Yeah.
No me too as well.
Well, hey, I have a lot of it, you know, I put a lot in Amazon,
so I'm going to hopefully, over the next three years will make
some money on it. So, hopefully, hopefully, at
some point, it will break out of this.
Well, hey, I should wrap it up there, but I appreciate you
coming on and sharing your thoughts.
Cool. No thanks for having me.
Would you take time talk to you next time?
All right, man.