Amazon.com, Inc. (AMZN): Is Profit No Longer the Motive of Business?

The only thing that stops the wave
I have been questioning everything I thought I knew about business, especially since I’m short Amazon. How can my thesis that Amazon’s operations will continue to struggle be so correct and the stock still be moving higher?

The only answer is that investors will have to demand more from companies, or they’ll be more than happy to sell at no profit. Right now that isn’t happening for Amazon, and Google is happy making money on search and giving away a plethora of other products.

The transition in China will be interesting to watch as the country becomes an ever larger part of the world’s economy. Will state-run banks begin requiring larger profits from manufacturers, or are razor-thin margins enough to satisfy them? What happens if some of these banks are turned over to the private sector — does the dynamic change?

Foolish bottom line
I’m an investors who likes companies who make money and the trend of no-margin businesses have left me scratching my head at times. But as investors try to justify no-margin businesses by moving targets to cash flow or revenue growth or whatever metric is doing well at the time, I’m reminded of the last time we tried to redefine business. The Internet bubble of the late 1990s was built on a notion that clicks or page views were more important than profit. We all know how that ended, and long-term investors who stuck with profitable companies that traded at reasonable multiples were rewarded for their patience. Maybe the same thing will happen again, or maybe we’re entering a new no-margin business world?

Fool contributor Travis Hoium owns shares of Apple and Microsoft, and is short shares of Amazon.com. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, General (NYSE:GE) Electric, Google, International Business Machines (NYSE:IBM)., and Microsoft.

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