Breaking Up Is Hard to Do

Here’s a link to a podcast at Atlantic on breaking up Amazon on anti-trust grounds.

That wouldn’t be my first choice. That would be for Amazon to break Amazon up on business grounds. I have a question for people who are more stock-savvy than I (which includes almost everyone). Can Amazon’s valuation be rationalized? Can its revenues ever justify its stock price? I have the same question about Facebook.

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  • Guarneri Link

    Heh. I live in the world of valuation and I don’t get it. Academically, the stock price is the discounted value of all future cash flows, basically dividends, repos and terminal enterprise value.

    As such, enough people are either a) discounting at a low rate, meaning they think it’s not a very risky proposition or, b) pretty cock sure of the future growth of the cash stream. Or both. I don’t understand either. After all, the anti-trust drums are already beating.

    Remember, people felt the same way about back in 2000 as well. Further, remember, the efficient market hypothesis says you can’t glean insights to the next price move from prior prices – all the info is impounded – but it doesn’t say the information or it’s interpretation is correct.

    In case you haven’t guessed, I’m an active value investor. Give me a nice piece of clay to mold. But don’t ask me to hop on and take a passive wild ride on a roller coaster.

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