#wall street

A public listing has never been our goal. It is one important strategy and vehicle for fulfilling our mission. It is a gas station along the road to the future. But Aliren should be conscious that, lying behind the massive allure of the capital market, there is unparalleled ruthlessness and pressure. In this market, only a small number of outstanding enterprises can maintain a gallop.
Jack Ma, the chairman of Alibaba, in his letter to employees (Aliren) following the company’s IPO prospectus. The whole thing is a great read.

John Cassidy for The New Yorker:

During the past year alone, as Cook pointed out today, its revenues have risen by forty-eight billion dollars—more than those of Google, Microsoft, Dell, Hewlett-Packard, and Nokia combined.

You might think that would be enough to satisfy the velociraptors on Wall Street, but you would be wrong.

The entire piece is worth the read.

Michael J. De La Merced for NYT’s DealBook discussing hedge fund manager David Einhorn’s lawsuit against Apple:

Mr. Einhorn on Thursday compared Apple to his grandmother, whose experience surviving the Great Depression molded her into an extreme saver who did not leave voice mail messages for fear of using extra cellphone minutes. The company’s own near-death experience in 1997, he said, left a similarly profound scar on its corporate psyche.

It is fascinating just how conservative Apple has been with its cash — especially when compared to a company like Amazon, which can’t seem to get its cash off the books fast enough (to Wall Street’s delight, no less). At some point, this will always going to piss off Wall Street.

There’s also a pretty good Branch forming around the related topic of taking Apple private…

Mark Gimein for Bloomberg:

Comparing Bezos’s fortune to Amazon’s earnings highlights how deeply puzzling that increase has been. Since 2003, the first year in which Amazon earned a profit, through the end of 2011, Amazon has reported a total of $5 billion in earnings. Amazon has not yet reported results for this year; it lost money in the last quarter, but is expected to turn a profit for the year.

Think of it this way: if Bezos had started the company himself, still owned all of it, and had taken out every penny in profit, his bank balance would be less than one-quarter of what his shares are worth. Or think of it another way: Apple’s profit for the last quarter alone is well over twice Amazon’s profit over its entire entire existence.

It’s crazy, but Amazon appears to be “gaming” Wall Street by not being extremely profitable. There really is nowhere to go but up. The sky is still the limit. As opposed to Apple, which has earned more money in the past year than any company ever save one: Exxon. If the sky is the limit, they’re almost in outer space.

Matthew Yglesias for Slate:

In any line of business where you’re earning healthy profits you always need to worry that a competitor will undercut you on price. But normally you can also have some confidence that they’ll be restrained in their price cutting by the need to maintain profits of their own. Amazon is totally off the leash in this regard. Wall Street treats it like a brand new startup that just needs to think about growth and can find a viable business model later. Which means that if they come after you, you have no recourse. Your profits are going to shrink, and your investors are going to punish you for it but Amazon’s profits don’t necessarily need to grow proportionally. They just need to show they can poach your market share.

Be afraid.

Just take one look at his PE Ratio chart comparing Amazon to Apple and Walmart. Amazon takes a dive into the red, losing $274 million last quarter, and Wall Street seems to love them even more. Apple earned $8.2 billion in pure profit in the same span, and Wall Street has been freaking out.

Philip Elmer-DeWitt breaks down how analysts — both Wall Street and independent — did in guessing Apple’s lastest insane quarterly numbers.

Check out his spreadsheet at the bottom of the page. You’ll note that almost all of the green is at the top (Independent analysts) while most of the red is at the bottom (Wall Street analysts). Hendi Susanto of Gabelli & Co. should get a special award — he actually believed Apple’s revenue would be below even Apple’s own guidance (that never happens). 

To me, there are two really crazy things about this spreadsheet (which says all you need to know about how good Apple’s quarter was):

1) No one — not one analyst — predicted a number above Apple’s actual revenue. The closest one was still well over a billion dollars off.

2) Earnings Per Share and Gross Margin were even crazier. No one was close on either.