This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Give Amazon Some Respect

Stocks in this article: NFLX AMZN MSFT GOOG AAPL TWX

NEW YORK ( TheStreet) -- Generally, these articles go to die in the comments section. As such, I was encouraged by the response I received to Monday's tamely titled article Amazon (AMZN) vs. Netflix (NFLX): Jeff Bezos Could Squash Reed Hastings Like a Bug.

The first solid comment came from "Felix Urman." Here's the gist of it, lightly edited:

You do realize that Amazon's cash only increased because it issued $3 Billion in debt, right? ... with Reed Hastings having MSFT connections, I wouldn't bet against MSFT or another deep pocketed suitor to buy out/take a stake in Netflix if only to force Amazon to burn more cash as it now competes against MSFT in the cloud and tablets, google in the cloud, devices and shopping, and Apple in everything.

And, here's the second one from somebody who goes by northernlimits:

Put another way Amazon needs Netflix. As content purchasers, price becomes everything. As we all know pricing power vs pricing cost is a balancing act that needs many in the competitive pool to maintain the pricing balance that provides liquidity, profits and value for the consumer. Sometimes it is in your own best interest to have a weaker competitor / partner to maintain that balanced eco-system.

That's why I get up at four in the morning -- to help initiate these conversations.

These comments come at the issue from different angles, yet both address notions of competition and spending. I agree with everything in comment number two, but respect both takes equally. Each adds to the conversation; it's not the same old, tired lament of AMZN's P/E.

First, I do realize that Amazon took out $3 billion in debt. Mea culpa. I probably should have mentioned it in my article; however, in all seriousness, I don't consider it relevant to the story.

Prior to the offering Amazon had no meaningful long-term debt to speak of. In fact, relative to its cash pile and revenue, it still doesn't. This is a classic case of a company poised to grow exponentially, taking advantage of a low-interest rate environment. Given that Amazon had about $5 billion in cash on the books going into the transaction, I'm not sure how you could construe it any other way.

As I explained in the Bezos bug-squashing article and Netflix Probably Should Be Bankrupt, Stock Closer to Zero, even though Reed Hastings tells you it's the same situation at Netflix, it's not. Just look at Netflix's financials. They're an absolute mess, in isolation and relative to Amazon.

Netflix is mired in a vicious cycle of spending with no end sight. It can't just turn off the tap on buying third-party content and creating original programming. Amazon, however, can throttle back as this current hyper-phase of growth moderates. But, just remember, it's not going to happen overnight.

Also, remember, I know the score.

Love Netflix the service. In fact, I would, without second thought, pay $20 a month for it. Sort of, kind of love the stock . . . enough to have predicted its rise from the dead and subsequent move past $100. But I just cannot buy the business model, which is why, at day's end, it's impossible for me to buy what Reed Hastings is selling on this debt deal as well as his company's future.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs