Analyst Says Amazon 'Should Worry More About Making Money Than Growing' In Wake Of Jabong Rumor
VCCircle recently reported that the merger was inching closer and could be worth as much as $1.2 billion.
Three analysts (who had no comment on the rumored acquisition) told Benzinga that they were not aware of Jabong until this week. Others had very little to say about the rumor.
"Clearly they're trying to boost their apparel offerings and this facilitates that," Monness Crespi Hardt analyst James Cakmak told Benzinga. "Apparel is a large category. It's still quite underpenetrated by Amazon. They have the MyHabit platform to tackle the fashion vertical. This would certainly serve as complementary to that. But I think the purchase price would have to be justified through a better understanding of the company's financials, which I don't know. [And] $1.2 billion is a pretty big figure."
At press time, Amazon had not yet responded to a request for comment.
Core Business First
John Thompson, CEO and chief investment officer of Vilas Capital Management, told Benzinga that Amazon should focus on driving profit from its core business before chasing a startup.
"They should worry more about making money than growing," said Thompson. He believes that if Jabong is at all similar to Amazon, it will probably add to Amazon's overall losses.
"I think Amazon has a real problem that in the history of the company they've earned less than $2 billion over the last 20 years," Thompson added. "When you have a $150 billion market cap, that means that the market is saying from now until infinity -- whenever that point in time is -- Amazon will earn well over $150 billion in net income.
"The $150 billion they're willing to pay for today is the present value of all those future earnings. So we're talking, conservatively, the company should have to earn $500 billion over its lifetime."
Thompson (who is short Amazon) doesn't have a positive outlook.
"[Amazon has] showed no hope of earning any profit over the next 12 months," Thompson continued. "It's a profitless machine. It's almost like a charity run for the benefit of client customers at the expense of their shareholder base."
Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
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