Amazon.com, Inc. (AMZN) has More Potential Says Bill Nygren

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Amazon.com, Inc. (NASDAQ:AMZN) is a leading company which serves its customers through retail websites. They enable the option of customers selling their products through their portal. They also allow authors, musicians, app developers and film makers to sell their content directly to consumers without help of agents.

Amazon.com, Inc. (NASDAQ:AMZN) is going through a torrid time because of a law suit filed against them by FTC. There was also some general feeling among investors and type of business that Amazon does may not see long term benefit. But Bill Nygren, Portfolio Manager, Oakmark Funds thinks otherwise. Nygren said on CNBC that he finds big value in Amazon Stock.

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He said that investors should learn to distinguish between company like Amazon.com, Inc. (NASDAQ:AMZN) and a steel mill. Steel mill generally invest in plants and equipment’s for growth and it takes 20-30 year life time of that equipment to get reflected in the income statement. But Companies like Amazon spend to lower prices for the consumers, which get reflected in the income statement right away.

“So we think when you look at Amazon, instead of looking at what they are currently earning, it’s useful to look at what the scale of company is and how does it look on a price-to-sales basis,”, He strongly supported Amazon.

He also feels that lot of Amazon.com, Inc. (NASDAQ:AMZN) sales happens through third party. The company would get rental income like mall owners which is not added to adjustments in full gross sales. When we look at the adjusted full gross sales instead of net sales, Nygren thinks that Amazon is actually giving pretty big discounts to their customers when compared to an average retailer. He said that this company is getting many investors worried that they may push other retailers out of business.

Nygren thinks that Amazon.com, Inc. (NASDAQ:AMZN) stock is actually trading at a much lower value now.

“[…] Somewhere around 400, it would be priced like an average retailer relative to its sales base, we think it should be at a premium to that,” he added.

He thinks as the company sales keep growing every year, this spread in valuation would keep increasing.

Amazon.com, Inc. (NASDAQ:AMZN) has to handle the tax irregularities issue in the EU due to which there was a slight dip in the stock recently. Among the key investors in the company are Lansdowne Partners, owning approximately 2.95 million shares and Blue Ridge Capital with 810,000 shares as of  the end of March 2014.

Disclosure: None

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