Tomahawk, WI 10/17/2013 (BasicsMedia) – There has been a lot of concern regarding Amazon.com, Inc. (NASDAQ:AMZN). The concern stems from investors making enquiries regarding the company’s profitability or lack thereof. AMZN is not the only company that enjoys this level of profitability. A number of U.S companies are enjoying possibly their best year since the financial crisis of 2008 and 2009. A few of these stocks include TSLA, Netflix, LinkedIn and Facebook to name a few. The question I would want us to address here is; what are the areas where AMZN’s profits come from?

Does AMZN Struggle to Make Profits?

When someone reads of profits and AMZN mentioned in the same line, they may wonder if the company referred to here is Amazon.com Inc or not. It has been years since AMZN reported profits during any of its quarterly financial results. If you look at AMZN’s financial results for the last few years, you will notice that it consistently posts massive revenues. Its revenues are on a growth curve that is the envy of many. The challenge with such a scenario is that the company enjoys massive revenues but there is very little to show in terms of profits. Why is this so?

If you want to see whether a company’s profitability is under threat or not, you need to focus on its free cash flow. Fortunately, AMZN does not struggle here as well. The company’s free cash flow in the last twelve months is quite impressive. Nevertheless, most investors are put off when they fail to see any profits on its financial results. This is quite understandable since profits show you that the company is in a healthy position financially, but this should not be the only factor you use to determine whether a stock such as AMZN is worth the investment or not.

Where Does AMZN’s Revenue Go?

One may wonder where AMZN’s revenue goes. If the company makes massive revenues every quarter, as the financial results clearly indicate, where does all this money disappear? AMZN has always been good at reinvesting its revenue back into the company. If it never reinvested, I shudder to think where it would be right now. I do not think AMZN would be attracting the kind of revenues it has been reporting each quarter. As long as there is adequate free cash flow, and the revenue keeps growing, investors should not give up on AMZN’s ability to make profits.

AMZN Is Not a Single Business

Some investors have concluded that AMZN can only remain in business as long as it does not make profits. Others have said that the company is only waiting for the right time when it will suddenly decide to start making profits once it has gained enough share of the market. I do not think that AMZN, or any other company for that matter, can do this on its own.  However, what I know is that AMZN is more than one business. It is a combination of various businesses, of which some make profits and others are yet to reach such hallowed levels.

Once all the various businesses that comprise AMZN start making profits, the whole company will be profitable. This is the reason I strongly believe in AMZN’s profitability, but in the long-term.

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