Jumping The Great White Shark Of Bubble Finance

Wall Street has now truly jumped the shark---the one jockeyed by Jeff Bezos.

Thursday night Amazon reported a whopping 41% plunge in free cash flow for the March 2018 LTM period compared to prior year. Yet it was promptly rewarded by a $50 billion surge in market cap----with $10 billion of that going to the guy riding topside on the Great White Shark of Bubble Finance.

That's right. Amazon's relatively meager operating free cash flow for the March 2017 LTM period had printed at $9.0 billion, but in the most recent 12 months, the number has slithered all the way down to just $5.3 billion.

And that's where the real insanity begins. A year ago Amazon's market cap towered at $425 billion---meaning that it was being valued at a downright frisky 47X free cash flow. But fast forward a year and we get $780 billion in the market cap column this morning and 146X for the free cash flow multiple.

Folks, a company selling distilled water from the Fountain of Youth can't be worth 146X free cash flow, but don't tell the giddy lunatics on Wall Street because they are apparently just getting started.

Already at the crack of dawn SunTrust was out with a $1900 price target---meaning an implied market cap of $970 billion and 180X on the free cash flow multiple.

At this point, of course, you could say who's counting and be done with it. But actually, it's worse----and for both Amazon and the US economy.

That's because Amazon is both the leading edge of the most fantastic ever bubble on Wall Street and also a poster boy for the manner in which Bubble Finance is hammering growth, jobs, incomes and economic vitality on main street.

Moreover, soon enough a collapsing Wall Street bubble will bring the already deeply impaired main street economy to its knees. So Amazon is a double-destroyer.

In this context, Bezos e-Commerce juggernaut racked up $174 billion of sales during the March LTM period, which represented a massive $45 billion or 35% gain over prior year (both figures exclude AWS). By way of comparison, that one-year gain is nearly double Macy's total annual sales!

Even when you adjust for the Whole Foods acquisition that was not in the 2017 LTM numbers, the sales gain was about $35 billion or 27%.

Either way, the robo-traders got damn excited, scooping up AMZN's shares hand-over-fist on the back of its "great sales momentum". But as we said yesterday, headline reading algos don't get far below the surface, and in this case, they didn't even break the skin.

Fully 96% of Amazon's $5.0 billion of  LTM operating income was accounted for by its cloud services business (AWS).

The e-Commerce juggernaut, by contrast, posted just $188 million of  LTM operating income, which am0unts to, well, 0.1% of sales on a computational basis. But we'd round that to zero---especially because Amazon's e-Commerce business was already almost there in the year-ago period when its margin on sales came in a tad higher at 0.6%!

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