Today, Amazon released financial results for the previous quarter.
- Revenue was $17.43 billion, an increase of 35% year-over-year
- Profit was $177 million, a decrease of 58% year-over-year
- Earnings per share were $0.38, a decrease of 58% year-over year
- Cash flow was increased by $400 million
- Gross margin was 1%
Compare that with Apple’s latest earnings report.
- Revenue was a record $46.33 billion, an increase of 73% year-over-year
- Profit was a record $13.06 billion, an increase of 118% year-over-year
- Earnings per share were $13.87, an increase of 116% year-over-year
- Cash flow was increased by $17.5 billion
- Gross margin was 44.7%
Let me put it another way. In the previous quarter, Amazon profited $177 million. Apple profited $133 million - per day.
M.G. Siegler describes why there is such a disparity:
Well, first and foremost, most of the goods they sell have low margins. But even the goods that should have high margins — hardware — have low margins.
Or worse. Take the Kindle Fire — Amazon’s most popular product (though don’t bother asking how many they actually sold) — it’s sold at a loss.
What is really perplexing is that Amazon’s stock is still much more expensive than Apple’s. The P/E ratio1 for Amazon (102.5) is far greater than Apple’s (12.9). It is beyond my understanding why a financial juggernaut like Apple is priced an order of magnitude cheaper than a company that can barely muster 1% profit. Especially, when Apple has grown at a rather sustained rate over the past six years. Deluded analysts indeed.
I realize that the companies aren’t exactly apples-to-apples (see what I did there?). However, Amazon has entered the tablet market with the support of a fully inclusive content distribution system - much like Apple. I think it is a reasonable comparison to make.
- P/E = Price per Earnings. It is a representation of how expensive a stock is relative to the company’s success. [return]