The Rule Breaker Portfolio lost a little bit more than the rest of the market today, dropping 1.32% in value versus The Motley Fool NOW 50's loss of 1.17% (about in line with the S&P 500, today). The Nasdaq fared worst, losing 2.19%.
It was a day like no other day, really... and yet it was a day like all other days.
(That comment was paraphrased and cribbed from a 1985 movie called The Sure Thing, a funny John Cusack flick in which the creative writing teacher, played by Viveca Lindfors, responds to such a line in a student composition by saying, with a hint of exasperation, "You have a wonderful gift for... ambiguity.")
Ambiguity is what stock market recaps are really good at, relying as they do on phrases like "profit-taking" and "inflation worries" to explain why the market went up or down. Sigh.
Before I get into what interested me most about the day (Amazon's earnings reported after the bell), I want to make a special offer. A talented friend of mine named Jeff Bjorck -- a longtime Fool reader and psychologist at Fuller Theological Seminary -- recently came out with a CD of his own original piano compositions. I find it lovely, and as a Foolish patron bought 100 of them! For whom? You, if you're a pianophile and reading this before 10 p.m. EDT tonight.
If you'd like your own copy, just e-mail MelissaF@fool.com and let her know your name and address, and one Foolish thing about you. We'll give Jeff's CD away to the first 100 takers, and if you don't get one we apologize because we only have 100. [Note: Sorry, all 100 copies have been distributed.]
Fools support Fools, and Jeff has been a Foolish online friend of mine for a few years. Fools support non-Fools, as well, of course -- there are more of them!
OK, Amazon.com (Nasdaq: AMZN) reported a first-quarter operating loss of 35 cents a share, compared with Wall Street estimates of --
Hey! Do you really care about that? If so, I'd encourage you to begin to try to get away from the Wall Street estimates, as have I. They systematically understate expected results, coming as they do almost directly from the mouths of managers. At the same time, I do not find "whisper numbers" to be particularly interesting or reliable either. Rather than get hung up on the very short term ("Did they beat estimates?" and "How will the stock do tomorrow?"), I encourage you to ask yourself how this business or any other DID, and the implications of that quarter's performance for the longer term. That's thinking like an owner, not a speculator.
So anyway, the Wall Street consensus according to our Fool Data page for Amazon was a loss of 36 cents per share. So they beat estimates! What a surprise!
More importantly, sales rose 95% from last year's calendar first quarter to $574 million. Total customer accounts were up over 20 million. The most important metric (for me) remains orders from repeat customers, and these represented 76% of all orders in the period.
Does that sound impressive? Well, let's think about that, rather than just mouthing numbers.
What if that figure were 0%? Is that good or bad?
Well, it would show that the tremendous growth (since revenues were up 95% to $574 million) came from millions of people who had never used Amazon.com before, and who used it just once, each. It would also mean that ALL of Amazon's previous customers (who generated over $200 million in sales in the comparable quarter last year) had ended their relationship with Amazon. Incredible customer growth (about 20 million new ones), then, but incredible customer churn.
What do you make of that? I would call it bad. It would undermine my belief in Amazon's "customercentrism" (CEO Bezos' word). I would think: "These guys can market, but they can't serve!"
Continuing to play with numbers, what if the repeat-order share of revenues were 100%? The virtual opposite. So if it's the opposite of something bad, would that make it good?
Well, 100% would mean that Amazon had succeeded mightily in getting their existing customer base to buy more, more, more -- 95% more than last year. That's impressive. At the same time, we would have to wonder why Amazon had been unable to lure any new customers. We would be very dubious about their longer-term sustainable growth.
As it turns out, the customer growth from last quarter was up 3.1 million accounts to 20 million. And 76% of total sales came from repeat purchasers. Is this (76%) the "right" number? It's about as good as any other. The company saw moderate customer growth and strong sales growth.
Overall, the report is almost exactly what you'd expect. With each passing quarter, Amazon continues to solidify itself as a well-capitalized long-term player in electronic commerce. At this point, it is in a class by itself, considering its market share and brand presence compared to so many (too many) of the world's other "dot-coms." Of course, with the growth comes less potential for massive future appreciation in the stock price -- sort of a natural consequence of larger and larger numbers. As someone who's held the stock for three years now, I continue to hold it contentedly with a belief that Bezos & Co. will execute according to plan. I myself think I spent more money purchasing stuff on Amazon.com in the past quarter than any other, and probably even more the next. Not that this should mean much to you. But I do generally let my investment dollars flow in the same direction as my consumer dollars.
For more on Amazon, take a stroll through our Amazon.com discussion board, and check out the free Motley Fool Research report.
Finally, speaking of reports, did you know you can now create and write your own original research and ideas about investing, business, and technology, and offer them for sale via our newest Motley Fool enterprise? Check out Soapbox! It's at www.soapbox.com. We're accepting applications from all interested authors now.
Fool on and Soap up!
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