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. 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. 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.